Last checked at 19 Mar 2010 07:00
Preliminary Results for the year ended 31 December 2009
T. CLARKE CONFIDENT ON FUTURE PROSPECTS AS IT MAINTAINS DIVIDEND
T. Clarke plc, the building services group, has announced its preliminary results for the year ended 31st December 2009.
|
| 2009 | 2008 |
| Revenue 1 | £178m | £220 m |
| Underlying profit before goodwill impairment, property disposal profit and tax 1,2 | £7.3m | £15.2m |
| Profit before tax 1 | £6.8m | £13.4m |
| Basic earnings per share (pence) 3 | 10.03p | 22.12p |
| Underlying earnings per share (pence)1,2 | 12.51p | 26.67p |
| Net cash and bank deposits | £23.2m | £30.4m |
| Final dividend per share | 8.75p | 8.75p |
| Total dividend per share | 13.0p | 13.0p |
| 1 Continuing operations 2 Underlying - before goodwill impairment of £0.8m (2008: £1.8m) and a property disposal profit of £0.3m (2008: £nil). 3 After loss on discontinued activities of £0.6m (2008: £nil).
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Highlights
·; Good results in difficult trading conditions
·; Results are after restructuring costs of £1.4m to streamline business (2008: £0.4m) and bad debts of £1.9m (2008: £1.5m)
·; Strong balance sheet including net cash and bank deposits of £23.2m (2008: £30.4m)
·; Dividend held for the year at 13 pence per share
·; Order book £160m (2009: £160m) plus £40m of contracts under negotiation (2008: £30m) of which £110m (2008: £140m) is due for completion in 2010
London
·; Revenue of £67.8m (£102.1m)
·; Operating profit of £2.9m (2008: £9.8m) is after restructuring costs of £1.1m (2008: £0.4m)
·; Order book of £90m as at 31st December 2009 (2008: £75m)
Regions
·; Revenue from continuing operations of £109.8m (2008: £118.0m)
·; Operating profit of £3.2m (2008: £2.4m) is after restructuring costs of £0.3m (2008: £nil) and exceptional bad debts of £1.4m
·; Solid overall performance
·; Restructuring of three divisions into South (including London), North and Scotland
·; Order book of £70m as at 31st December 2009 (2008: £85m)
Mark Lawrence, Chief Executive commented:
" The year has proved to be challenging, but the group is in good shape. I am pleased that we have maintained our leading position in many of our markets, despite increased competition and pressure on margins. Financially the group is in good shape with a significant cash balance at the year end of £23 million. This has given us the resources to consider further opportunities to grow by acquisition. We remain focused on shareholder value and we have maintained the total dividend for the year at 13p.
" Today we have also announced the acquisition of D&S (Engineering Facilities) Limited for a total cash consideration of up to £11.6 million. This acquisition widens the range of services we can offer clients. It will give us the platform from which we can build a broader national facilities management business that compliments our existing activities. The acquisition is expected to be earnings enhancing and we are confident that it will flourish as part of T.Clarke.
" Looking forward, there are some signs of a recovery in commercial property markets. In London we are encouraged by a number of new projects getting underway, which could lead to good opportunities. In the regions we have restructured the management of our operations which should improve the performance in the future. I am also pleased that our order book, which stood at £160 million plus £40 million of contracts under negotiation at the 31st December 2009, is robust with some very encouraging prospects to grow from here. We are looking to the future with cautious optimism."
-ends-
Date: 19th March 2010
For further information contact:
| T. Clarke plc | City Profile |
| Mark Lawrence, Chief Executive | Simon Courtenay |
| Victoria French, Finance Director | Tel: 020-7448 3244 |
| Tel: 020-7358 5000 |
|
| web: www.tclarke.co.uk |
|
Ordinary Shares - Listing Category: Premium - Equity Commercial Companies
Chairman's statement
We are pleased that despite a backdrop of a very challenging market, we have achieved a creditable performance and maintained our leading position in our core markets. Group turnover and profit during 2009 were in line with expectations but reflected the reduced levels of activity and a tightening of margins, particularly in our London operations. Adjusted profit before tax for the group fell by just over half the level achieved in 2008 to £7.3m, before goodwill impairment and profit on a property disposal. Although our liquidity remained strong, the group's results reflected the low level of interest rates throughout the year which reduced our investment income.
Overall the performance of the regional subsidiaries held up well, but as outlined in the interim results, some restructuring was necessary to eliminate loss-making units and to consolidate operations into businesses with critical mass. The operations of GDI were wound down during the year, and Kestrel was sold in October. The Operational Review provides a detailed commentary on all our activities during the year including our restructuring programme. I have no doubt that the new, simpler organisational structure, with group companies being managed under South, North and Scottish divisions, reporting to a Group Management Board, will result in closer integration and cooperation between our various subsidiaries, and the beneficial sharing of knowledge and best practice across the group.
The trading environment remains difficult, both in London and more widely in the regions, but having slimmed down our cost base during 2009 we are well placed to tender competitively for work across the whole spectrum of our activities. We are involved currently with a number of prestigious projects in the Capital and the group continues to win good work in the regions. While we do not expect a material change in market conditions in 2010, we remain cautiously optimistic and we take comfort from our financial strength.
The quality of our staff remains one of the enduring strengths of T. Clarke, and none more so than at the Chief Executive level. We have been remarkably fortunate to have been served in that capacity for many years by Pat Stanborough, who has given a lifetime of service to the group. He retired from the board at the end of 2009. I would like to express on behalf not only of the board, but of all those who have worked with Pat as colleagues and clients, our great appreciation of his dedication to T. Clarke. His financial and contracting expertise have been crucial to our progress over the years. I am delighted to report that in Mark Lawrence he has a worthy successor. Like many of our senior managers, Mark has been with T.Clarke throughout his working life and is well respected within the group and by our wide client base. I wish him well in the years ahead.
We have announced the acquisition of D&S (Engineering Facilities) Limited for a total cash consideration of up to £11.6 million. The company is based in Accrington, Lancashire and is a facilities management business and is complementary to our existing activities. In the last financial year, D&S had turnover of £16.6m and profit before tax of £0.5m after approximately £1.0m of non-recurring private company costs. The acquisition is expected to be earnings enhancing for the shareholders of T. Clarke. We welcome the directors and employees of D&S to the group and look forward to benefiting in future from the wider customer and service base which they will bring to our group.
In conclusion, despite the market challenges, the future for T.Clarke remains encouraging. We will remain focused on maintaining our market leading position. We have a solid financial base which will underpin the future growth of the business. Once again, I thank our loyal staff, clients and suppliers for their continued support.
Russell Race
Chairman
19th March 2010
Business review
Operational review
T.Clarke continues to be a market leader with an enviable reputation. Its group companies are widely recognised for delivering the highest level of service to every client and in training apprentices who become the skilled tradespeople and engineers of tomorrow.
Maintenance of this position is key to the company's long term prosperity, which can be expressed in terms of returning value to shareholders and attracting and retaining the best people. The T.Clarke group of companies provides services and coverage across the UK from Aberdeen in Scotland to St. Austell in Cornwall.
Our strategy and core objectives across the group are as follows:
·; Maintain our excellent reputation in the market place, provide top quality service to our customers and develop long standing customer partnerships
·; Focus on new market sectors to broaden the spread of the business and to reduce market risk
·; Provide a comprehensive service to all market sectors and achieve leading positions in each sector
·; Pursue controlled organic growth and growth by acquisition
·; Offer ongoing apprentice schemes and train all staff in new technologies and systems
·; Offer industry-leading remuneration packages to help retain and motivate our staff
·; Provide a safe and healthy working environment for all our staff and operatives
·; Reduce the impact of the group's business on the environment
·; Continue involvement in social and community issues
To enhance its value for shareholders, the group will drive its operations and strategy from these core objectives and will look to improving efficiency, support for our customers and maintaining competitive advantage by having a highly skilled, directly employed labour force.
Market development
The well-publicised downturn in the commercial property sector, particularly in the City of London, continues. However activity by some major developers is showing the initial signs of recovery, most notably Land Securities have released three key schemes in London's West End worth £655m. The number of high quality fit out opportunities remains limited. Many of our clients are planning or undertaking upgrades to their existing infrastructure both within their office accommodation and at their data and energy centres. This is an area where we have an excellent reputation for delivery and are therefore well placed for such opportunities.
There is continued demand in the public sector, such as health, education, prisons and rail, but uncertainty surrounding the forthcoming general election is possibly affecting key budget decisions with respect to capital expenditure.
While the number of tender opportunities is encouraging there continues to be pressure on margins and the level of competitors bidding for projects is high. Securing work is important to our leading position in the industry, however we remain selective and vigilant with regard to risk.
Our strategy is to build strong relationships with our client base and supply chain, and to enhance our operational skills and finances in the current environment.
Operations
Despite the challenging trading conditions the group was still able to achieve a turnover of £177.6m. While our regional business performed well its results for the year were impacted by bad debt. We carefully assess our credit risk but in these uncertain times this is challenging, particularly where established contractors' bankers and other providers of finance take increasingly demanding and short term views.
Our group continues to mature and we are pleased with the integration of our businesses. As highlighted in our interim results, we are consolidating our regional businesses and our focus is on strengthening operations. Our business in Altrincham has now ceased trading and our business in Rowley Regis, West Midlands has been sold. Our business in Kings Lynn, Anglia Electrical Services, now operates as a division of Aylward EMS, Huntingdon.
Recognising the importance of our Scottish operations we have re-branded our Scottish business T.Clarke Scotland from 1st March 2010 to support and underscore its position as an integral part of the group. We have an excellent local team in our Scottish business and since we acquired the former SCS Building Services business we have continued to make progress expanding our operations in Scotland. This is a natural progression and we are confident that the business will continue to make a significant contribution to our operations across the UK.
London
During 2009 we moved quickly to align our cost base to a reduced workload and inevitably this meant releasing people who had been loyal to the company over many years. We would like to thank all of those involved for their understanding and co-operation and wish them every success for the future. The full cost of this restructuring was absorbed in 2009.
Going forward, we enter 2010 a much leaner operation - our business remains in great physical and financial shape and is able to respond to future challenges and opportunities as they present themselves.
We are active on a number of key projects including the 2012 Olympic Stadium which is scheduled for completion in early 2011. Following our successful delivery of Westfield, London at White City we negotiated to undertake the electrical installation for Westfield's new shopping centre, Stratford City, which borders the Olympic Park, due to be opened in 2011. Enabling and design works have commenced at The Pinnacle, Bishopsgate. Works are at an advanced stage at One New Change, Cheapside, a 560,000 sq ft landmark office development featuring the largest retail development in the City of London, and at the Ravensbourne College of Design and Communication, Greenwich Peninsular, both of which are due for client handover in 2010.
Regions
Further restructuring was carried out in the regions with resultant closure costs and reduction in headcount during the year.
Our group companies across the UK have been successful in securing projects in a number of sectors. A selection of contracts recently secured are:
Brighouse & Sowerby Bridge Leisure Centre, Calderdale; Northern Ballet HQ, Leeds; HMP Hull Prison, Hull; Midlothian Community Hospital, Bonnyrigg, Edinburgh; David Walker Care Home, Rutherglen, Glasgow; Trinity Oakfield School, Newcastle upon Tyne; Heworth Pool, Gateshead; BT, Aylesford; Machine-X Recycling Plant, Wandsworth; and Data Centre, Sittingbourne, as well as continuing works at Waitrose, Dungeness and KIA Manston.
Board changes
At the beginning of 2009 Iain McCusker was appointed as an Independent Non-Executive Director and, given his financial background, Iain was also appointed chair of the Audit Committee.
As part of the restructuring programme announced in July, Barry DeFalco, who was the Managing Director for our Regional Operations, left the Company on 30th September 2009. We thank him for his loyal service and wish him well for the future.
At the end of 2009 Pat Stanborough retired from the Board and as Chief Executive. We all thank him for his many years of unstinting loyal service and his significant contribution to the success of T Clarke plc and its reputation within the market place. Pat will continue to serve the board in an advisory capacity during 2010.
Group Management Board
Part of the restructuring programme included how the group companies report and are managed. Historically we managed our operations through the London "Core" Business and the Regional Group companies. For operational efficiency three regional divisions have now been created comprising Scotland, the North and the South. Each regional division has a Managing Director responsible for the local companies within their region.
We have strengthened our Regional Board to form a Group Management Board, with a clear focus on delivering the Group's central strategy but one that is locally managed.
The Group Management Board, which consists of the Chief Executive, Finance Director and the Managing Directors for the three regions, formally meets on a monthly basis ahead of the main T. Clarke plc board meeting.
People
Our people, their values and reputation create our success. Providing a consistently high quality service to our customers is only possible with the right people. To be successful, T.Clarke must be a rewarding place to work. We provide opportunity and encouragement to help our people reach their potential. The group remains committed to providing the best training for all members of staff and draws on the expertise of its people from all group companies across the UK.
Community and the environment
We are committed to the community in which we operate and we contribute to a number of charities and fundraising events each year. Equally important is our focus on minimising any impact caused by our business on the environment and we continue to monitor our progress in this area.
Pensions
The risk associated with the defined benefit scheme has to be weighed against increased staff retention and other benefits to staff as a result of the scheme. During 2009, T. Clarke consulted with members and with effect from 1st March 2010 has altered the benefit structure from a final salary scheme with an accrual rate of 1/60th to a Career Average Revalued Earnings ('CARE') scheme with an accrual rate of 1/80th.
In order to contribute towards scheme funding, the group granted a charge to the value of the greater of £1.5m or half the value of our London property to the pension fund during the year. We have seen a reduction in the risk-based levy paid to The Pensions Protection Fund and have the ability to spread deficit contributions over a longer period. T. Clarke will continue to monitor the scheme and consult with members as required.
Principal risks and uncertainties
The main areas of uncertainty facing the group relate to market conditions, acquisitions, operational risk, cost inflation, people and health and safety. These are the main risk factors that could potentially impact the group's performance.
Market conditions
As a result of the economic climate, market conditions across the group continue to be challenging and we are not immune from such conditions. Some of the risk is mitigated by our strategy of diversity of our markets, both in terms of geography and sector.
The board remains focused on meeting market expectations and continues to target work in sectors in which we can deliver at acceptable margins, however the possibility remains that projects will be delayed, circumstances may change, including government priorities and there will be increased pressure on margins.
There could also be opportunities because, although we are a clear leader in our industry, we still have a relatively small share of our target market and with our strong cash position we are able to explore opportunities and bolt-on acquisitions at the appropriate time.
Acquisitions
Our strategy is to be able to offer the complete range of building services across the UK. We will sensibly consider appropriate opportunities that can advance this strategy both in terms of geographical coverage and services offered. Acquisitions involve a degree of risk but we aim to manage this via due diligence prior to acquisition, ensuring effective local management are in place and by the implementation of group reporting and internal control procedures.
Operational risk
We are continually assessing and managing operational risks through the bidding stage to the final commissioning of an installation and handover to the client. We have experienced teams of estimators and all bids are reviewed by a director and checks are carried out to avoid incorrect or non-competitive pricing. Inadequate supervision would result in poor quality and low productivity, both of which would result in loss of reputation and profit. Our contract engineers, supervisors, surveyors and skilled tradespeople receive regular training to meet our demanding standards.
Cost inflation
Commodity prices of copper and steel, which are major component parts within our industry, have risen considerably during the course of the year. In addition, UK prices of materials that we procure could be affected by the weakness of sterling. We have in place formal supplier framework agreements to manage this risk.
People
Providing a high quality service to our clients is only possible with the right people, and attracting and retaining high calibre staff is key to our success. This is achieved through a remuneration system linked to performance and strongly embedded training schemes throughout the group.
As a result of any downturn we have to take steps to align our business at all levels to match our current expectations.
We have continuous dialogue with the trade unions and continue to review our policies and procedures in managing this risk.
Health & safety
Increasing safety and reducing risk is a core objective of T.Clarke. We strive for an injury-free environment and the safest workplace possible for our employees, clients, sub-contractors and the public.
We recognise that any lack of commitment in our health and safety approach will have a negative impact on individuals, attract financial penalties and adversely impact our reputation.
The group has a comprehensive framework in place to manage health and safety risks and to ensure commitments and standards apply consistently to all of our operations. Our aim is to identify and correct potential risks through observations and regular monitoring. Our trained safety professionals develop and regularly update our safety plans and are focused on identifying areas for improvement and where good practices exist share them across the group.
Financial review
Summary of financial performance
The group's financial performance in 2009 reflected difficult trading conditions but the group delivered strong underlying results in terms of revenue, profit and adjusted earnings per share.
| Continuing operations | 2009 £m | 2008 £m | Change |
| Revenue | 177.6 | 220.1 | -19.3% |
| Adjusted operating profit * |
|
|
|
| London operations * | 2.9 | 9.8 | -70.0% |
| UK regions * | 4.0 | 4.2 | -4.8% |
| Property rental income * | 0.4 | 0.4 | 0% |
| Total adjusted operating profit * | 7.3 | 14.4 | -49.3% |
| Goodwill impairment | -0.8 | -1.8 | -55.6% |
| Profit on property disposal | 0.3 | - | - |
| Total operating profit | 6.8 | 12.6 | -46.0% |
| Investment income | 0.2 | 1.0 | -80.0% |
| Finance costs | -0.2 | -0.2 | 0% |
| Profit before tax | 6.8 | 13.4 | -49.3% |
| Adjusted profit before tax * | 7.3 | 15.2 | -51.9% |
| Basic earnings per share (pence) ** | 10.03p | 22.12p | -54.7% |
| Adjusted earnings per share (pence) * | 12.51p | 26.67p | -53.1% |
|
* Adjusted figures are calculated before goodwill impairment of £0.8m (2008: £1.8m) and profit on a property disposal of £0.3m (2008: £nil). ** Stated after loss on discontinued activities of £0.6m (2008: £nil).
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Revenue
The group's revenue from continuing operations decreased by 19.3% to £177.6m (2008: £220.1m). Total group revenue including discontinued regional operations was £179.5m (2008: £223.7m). Revenue from discontinued operations in 2009 was £1.9m (2008: £3.6m) which included Kestrel Electrical Systems Limited ('Kestrel') which was sold on 15th October 2009 and GDI Electrical Company Limited ('GDI') which was wound down during the year. Revenue in the London business decreased by 33.7% to £67.8m (2008: £102.1m) as a result of difficult trading conditions. Revenue from continuing operations in the regional businesses decreased by 6.9% to £109.8m (2008: £118.0m).
Operating profit - continuing operations
Group operating profit decreased to £6.8m (2008: £12.6m) and the operating profit margin was 3.8% (2008: 5.7%) after goodwill impairment of £0.8m (2008: £1.8m) and profit on a property disposal of £0.3m (2008: £nil).
Adjusted group operating profit, before goodwill impairment and disposals, was £7.3m (2008: £14.4m) and adjusted operating margin was 4.2% (2008: 6.5%).
The London business suffered a £6.9m decrease in operating profit to £2.9m (2008: £9.8m) as a result of the downturn in property development. In addition, the London business reduced its headcount in response to the slowdown which resulted in restructuring costs of £1.1m in the year (2008: £0.4m) of which £0.5m (2008: £0.2m) is shown in administrative expenses. The London operating margin was 4.3% which included the effect of these costs (2008: 9.5%).
Regional operating profit from continuing operations was £3.2m (2008: £2.4m) which excluded £0.8m (2008: £nil) of operating loss from the discontinued operations, GDI and Kestrel but included £0.3m of redundancy costs. The regional operating profit margin from continuing operations was 2.9% (2008: 2.1%). Adjusted regional operating profit from continuing operations, before goodwill impairment of £0.8m (2008: £1.8m) and loss on disposal of £0.05m, was £4.0m (2008: £4.2m) and the adjusted regional operating profit margin was broadly static at 3.6% compared to the prior year.
Weylex Properties Limited, which owns the freehold properties in the group, contributed £0.4m (2008: £0.4m) of operating profit together with a profit on a property disposal of £0.3m.
Group administrative expenses from continuing operations decreased by £1.2m to £24.0m (2008: £25.2m) due a reduced goodwill impairment charge of £0.8m (2008: £1.8m) and other cost reductions. Group administrative expenses would have reduced further except for a restructuring charge of £0.9m in relation to redundancy and termination payments, £0.6m of which related to the London business (2008: £0.2m).
Group bad debt expense totalled £1.9m in the year (2008: £1.4m). Regional bad debt expense was £2.0m (2008: £0.8m) which included a number of regional customers who went into administration. A bad debt credit in the London business of £0.1m (2008: charge £0.6m) arose due to cash recovered against bad debt provisions.
Profit before tax
Group profit before tax from continuing operations was £6.8m (2008: £13.4m) and the corresponding profit before tax margin was 3.8% compared to 6.1% in 2008.
Adjusted group profit before tax from continuing operations, before goodwill impairment and disposals, was £7.3m (2008: £15.2m) and the adjusted group profit before tax margin was 4.1% (2008: 6.9%).
Net interest reduced to a £0.02m finance cost compared to £0.8m of net interest income in the prior year due to a reduction in cash balances held, a decrease in interest rates and IAS19 interest costs.
Profit after tax
Group profit after tax from continuing operations decreased to £4.6m (2008: £8.9m) after taxation of £2.2m (2008: £4.6m). The effective tax rate decreased to 31.7% (2008: 34.0%) because the tax disallowable impairment of goodwill reduced from £1.8m to £0.8m and due to a £0.1m tax overprovision in the prior year. Total group profit after tax was £4.0m (2008: £8.8m).
Profit after tax margin on continuing operations was 2.6% compared with 4.0% in the prior year. Adjusted profit after tax margin excluding goodwill impairment and disposals was 2.8% (2008: 4.8%).
Earnings per share
Earnings per share from continuing operations were 11.56p (2008: 22.16p).Adjusted earnings per share from continuing operations, excluding goodwill impairment and disposals, were 12.51p (2008: 26.67p).
Basic earnings per share were 10.03p (2008: 22.12p).
Cash flow
Cash and bank deposits (net of overdrafts) as at 31st December 2009 were £23.2m (2008: £30.4m) and operating cash inflows before movements in working capital were £6.8m (2008 £15.0m). Working capital movements resulted in a net outflow of £5.5m (2008: £14.7m inflow) mainly as a result of an increase in trade receivables of £2.3m and a decrease in trade payables of £3.2m in the current year and due to the fact that in the prior year a £10.9m decrease in trade receivables from a boost in cash collections increased cash balances. After corporation tax outflows of £3.8m (2008: £3.2m), dividend outflows of £5.2m (2008: £4.9m) and receipts on disposal of property and plant of £0.9m (2008: £0.3m) there was a net decrease in cash plus bank deposits in the year of £7.2m (2008: increase of £21.4m). Cash management is a key priority and is actively managed across the group.
Dividend
The board has held the final dividend for 2009 of 8.75p (2008: 8.75p). The total dividend for the year is 13p (2008: 13p). The dividend per share is covered 0.8 times by earnings per share (2008: 1.7 times). The final dividend will be paid, subject to shareholder approval on 14th May 2010 to shareholders on the register at 16th April 2010. The shares will go ex-dividend on 14th April 2010. Further information regarding a dividend reinvestment plan (DRIP) which is available to shareholders is included in Note 6.
Pension obligations
An actuarial loss before tax of £5.9m, in relation to the defined benefit scheme, (2008: gain of £0.3m) has been recognised in reserves in the statement of financial position. The loss was mainly due to the inflation assumption increasing from 2.7% to 3.7% and the discount rate assumption, which is based on the yield of AA-rated corporate bonds, decreasing from 6.7% to 5.7% both leading to higher scheme liabilities.
Scheme liabilities increased from £18.9m to £28.0m, offset by an increase in scheme assets from £16.2m to £19.7m, resulting in a net £8.3m scheme deficit before taxation (2008: £2.7m). After taxation of £2.3m the deficit was £6.0m (2008: £1.9m).
In anticipation of the increase in the deficit, T.Clarke has, from 1st March 2010, reduced the benefits accruing to members from a final salary 1/60th accrual basis to a career average revalued earnings ('CARE') 1/80th accrual basis, following a member consultation exercise. A triennial valuation as at 1st January 2010 is due to be carried out during 2010 and a schedule of contributions will be agreed at that stage.
In order to contribute towards scheme funding, security (to the value of the greater of £1.5m or half the value of the group's London property) was granted on 13th March 2009 to the T. Clarke pension scheme as outlined in the section 'Pensions' of the operational review.
Treasury and funding
The group currently manages its funding so that cash generated is used in day to day operations, invested in organic growth or in acquisitions. The group does not currently have any long term debt apart from finance leases and similar hire purchase arrangements.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. There have been no changes in accounting policies during the year.
Financial risks
Credit risk
There is the risk that a counterparty will fail to discharge its obligations which may result in a financial loss. The group has procedures for mitigating the credit risk on trade receivables prior to accepting a contract and during the progression of the contract, however in the current climate this risk is heightened. The counterparty risk on cash and bank deposits is managed actively by the regular review of the credit-worthiness of the relevant banking institutions.
Liquidity risk
The group manages liquidity risk by maintaining adequate reserves and banking facilities, by monitoring cash flows and by matching the maturity profiles of financial assets and liabilities within the bounds of its contractual obligations. At the year end the group had £23.2m of net cash and bank deposits (2008: £30.4m).
Cash flow interest rate risk
The group is exposed to changes in interest rates on its bank borrowings and deposits. Surplus cash is placed on instant access, short-term or long-term deposit at fixed or floating rates of interest.
The group's financial instruments comprise cash and cash equivalents, bank deposits, overdraft facilities, contract and other trade receivables, trade payables and similar balances arising directly from its operations. The group does not trade in speculative financial instruments.
Summary and prospects
As expected, 2009 was a challenging year and tough decisions were taken to reduce our cost base and increase our competitiveness. As a result the group is in a much leaner shape, is financially strong and is prepared for the challenges ahead.
There remains unease within the market with respect to the timing and impact of the forthcoming general election on the construction industry, but there is also some optimism which is supported by developments in the commercial property market.
Despite these uncertain and challenging times we remain cautiously optimistic. Our order book at 31st December 2009 stood at £160m (2008: £160m) plus £40m of contracts currently under negotiation (2008: £30m) with £110m due for completion in 2010 (2008: £140m).
Mark Lawrence Victoria French
Chief Executive Finance Director
19th March 2010 19th March 2010
Consolidated income statement
for the year ended 31st December 2009
|
|
2009 £000
|
2008 £000 |
| Revenue Cost of sales | 177,579 (146,917) | 220,111 (182,426) |
|
Gross profit Other operating income Administrative expenses |
30,662 100 (23,983) |
37,685 100 (25,183)
|
|
Profit from operations Investment income Finance costs |
6,779 221 (238) |
12,602 952 (146) |
|
Profit before taxation Taxation
|
6,762 (2,146) |
13,408 (4,554) |
|
Profit for the year from continuing operations Loss for the year from discontinued operations
|
4,616 (610) |
8,854 (17) |
|
Profit for the year |
4,006 |
8,837
|
|
Earnings per share Attributable to equity holders of T.Clarke plc On continuing operations |
10.03 pence 11.56 pence |
22.12 pence 22.16 pence |
|
Consolidated statement of comprehensive income for the year ended 31st December 2009
| ||
|
|
2009 £000 |
2008 £000 |
|
Profit for the year |
4,006 |
8,837 |
|
Actuarial (loss) /gain on defined benefit pension scheme |
(5,872) |
324 |
|
Tax on items taken directly to equity |
1,644 |
(91) |
|
Other comprehensive (expense) / income for the year, net of tax |
(4,228) |
233 |
|
Total comprehensive (expense) / income for the year |
(222) |
9,070 |
Consolidated statement of financial position
as at 31st December 2009
|
| 2009 £000 | 2008 £000 |
| Non current assets Goodwill Property, plant and equipment Deferred taxation |
11,775 6,659 93 |
12,584 7,747 90 |
|
|
18,527 |
20,421 |
| Current assets Inventories Construction contracts Trade and other receivables Bank deposits Cash and cash equivalents |
344 11,126 16,459 10,660 12,881 |
292 11,255 14,220 - 34,363 |
|
|
51,470 |
60,130 |
|
Total assets |
69,997 |
80,551 |
| Current liabilities Bank overdraft and loans Trade and other payables Corporation tax liabilities Obligations under finance leases |
306 37,603 965 167 |
4,002 40,907 2,954 216 |
|
|
39,041 |
48,079 |
|
Net current assets |
12,429 |
12,051 |
|
Non current liabilities Retirement benefit obligation Obligations under finance leases |
5,959 99 |
1,938 221 |
|
|
6,058 |
2,159 |
|
Total liabilities |
45,099 |
50,238 |
|
Net assets |
24,898 |
30,313 |
|
Equity Share capital Share premium Profit and loss account
|
3,995 1,234 19,669
|
3,995 1,234 25,084
|
|
Total equity |
24,898 |
30,313 |
Consolidated statement of cash flows
for the year ended 31st December 2009
|
| 2009 £000 | 2008 £000 |
|
Net cash (used in) / generated by operating activities |
(2,586) |
26,314 |
|
Investing activities Interest received Cash placed on deposit Purchase of property, plant and equipment Receipts on disposal of property, plant and equipment Disposal of discontinued operations, net of cash disposed of
|
187 (10,625) (205) 924 4
|
905 - (1,024) 320 -
|
|
Net cash (used in) / from investing activities |
(9,715) |
201 |
|
Financing activities Equity dividends paid Repayments of obligations under finance leases
|
(5,193) (292)
|
(4,934) (171)
|
|
Net cash used in financing activities |
(5,485) |
(5,105) |
|
Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at beginning of year
|
(17,786) 30,361 |
21,410 8,951 |
|
Cash and cash equivalents at end of year |
12,575 |
30,361 |
Consolidated statement of changes in equity
for the year ended 31st December 2009
|
| 2009 £000 | 2008 £000 |
|
Balance at start of year
Profit for year Actuarial (loss) / gain on defined benefit pension scheme Corporation tax provision on pension benefits |
30,313
4,006 (5,872) 1,644
|
26,177
8,837 324 (91)
|
|
Total comprehensive (expense) / income for the year
|
(222)
|
9,070
|
|
Interim dividend paid Prior year final dividend paid
|
(1,698) (3,495)
|
(1,698) (3,236)
|
|
Balance at end of year |
24,898 |
30,313 |
Notes to the preliminary financial statements
Note 1 - Basis of preparation
T.Clarke plc (the 'company') is a company incorporated 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 ('IFRS') as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 and have been prepared on the historic cost basis.
The financial information does not constitute the company's statutory accounts for the year ended 31st December 2009 or 2008 but is derived from the audited financial statements for the year ended 31st December 2009. Statutory accounts for the year ended 31st December 2008 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31st December 2009 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 (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports, and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for the year ended 31st December 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for the year ended 31st December 2009.
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 2008.
The Group has adopted IAS 1 (revised) 'Presentation of financial statements' as of 1st January 2009. The revised standard prohibits the presentation of items of income and expenditure within the statement of changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two (the income statement and statement of comprehensive income). The Group has elected to present two performance statements, the consolidated income statement and the consolidated statement of comprehensive income. IAS 1 has also introduced a number of changes in terminology, and as a consequence the balance sheet has been renamed the 'consolidated statement of financial position' and the cash flow statement has been renamed the 'consolidated statement of cash flows'. There have been no changes to the reported results or financial position as a result of adopting the revised standard.
Note 2 - Segmental information
The group considers that it has only one business segment, being mechanical and electrical contracting.
For management and internal reporting purposes the group is organised into two operating divisions, London and UK Regions, and an internal property division until 31st December 2009, and the group has reported segmental information on this basis. All assets and liabilities of the group have been allocated to these divisions, apart from the retirement benefit obligation and tax assets and liabilities.
Following a strategic review, from 1st January 2010 the group has been reorganised into three regional divisions comprising Scotland, the North and the South (including London), and for the year ending 31st December 2010 onwards plans to report segmental information on this basis.
All the group's operations are carried out within the United Kingdom, and there is no significant difference between turnover based on the location of assets and turnover based on location of customers.
Segment information about the group's continuing operations is presented below:
| Year ended 31st December 2009 | London £000 | UK Regions £000 | Property £000 | Elimination £000 | Total £000 |
| Revenue | 67,765 | 109,814 | 584 | (584) | 177,579 |
| Profit from operations | 2,927 | 3,163 | 689 | - | 6,779 |
| Investment income | 201 | 54 | - | (34) | 221 |
| Finance costs | (237) | (35) | - | 34 | (238) |
| Profit before tax | 2,891 | 3,182 | 689 | - | 6,762 |
| Taxation |
|
|
|
| (2,146) |
| Profit for the year from continuing operations |
|
|
|
|
4,616 |
Profit from operations for the UK Regions is stated net of a goodwill impairment charge of £809,000 (2008: £1,801,000). Following the annual impairment review undertaken at 31st December 2009, the Directors concluded that the goodwill arising on the acquisition of Anglia Electrical Services Limited, which forms part of the UK Regions operating division, had been impaired due to a reduction in underlying trading. Goodwill in respect of this subsidiary has been written down to £nil in the consolidated balance sheet. No other class of asset other than goodwill was impaired. The impairment charge has been included in 'Administrative expenses' in the consolidated income statement. The segmental information for the year ended 31st December 2008 has been restated to exclude the results of operations reclassified as discontinued operations in the year ended 31st December 2009. Further information on discontinued operations is given in note 4.
| Year ended 31st December 2008 | London £000 | UK Regions £000 | Property £000 | Elimination £000 | Total £000 |
| Revenue | 102,132 | 117,979 | 637 | (637) | 220,111 |
| Profit from operations | 9,753 | 2,445 | 404 | - | 12,602 |
| Investment income | 781 | 262 | - | (91) | 952 |
| Finance costs | (97) | (140) | - | 91 | (146) |
| Profit before tax | 10,437 | 2,567 | 404 | - | 13,408 |
| Taxation |
|
|
|
| (4,554) |
| Profit for the year from continuing operations |
|
|
|
|
8,854 |
|
|
|
|
|
|
|
Other segment information:
|
| 2009 | 2008 | ||
|
| Capital additions £000 | Depreciation £000 | Capital additions £000 | Depreciation £000 |
| London | 41 | 28 | 12 | 28 |
| UK Regions | 297 | 527 | 677 | 658 |
| Property | 31 | 133 | 463 | 142 |
|
| 369 | 688 | 1,152 | 828 |
|
| 2009 | ||
|
| Assets £000 | Liabilities £000 | Net assets £000 |
| London | 29,241 | (21,224) | 8,017 |
| UK Regions | 39,888 | (17,519) | 22,369 |
| Property | 5,599 | (4,256) | 1,343 |
| Unallocated | 93 | (6,924) | (6,831) |
| Eliminations | (4,824) | 4,824 | - |
| Consolidated | 69,997 | (45,099) | 24,898 |
|
|
|
|
|
|
| 2008 | ||
|
| Assets £000 | Liabilities £000 | Net assets £000 |
| London | 41,532 | (31,140) | 10,392 |
| UK Regions | 38,996 | (15,236) | 23,760 |
| Property | 6,027 | (5,064) | 963 |
| Unallocated | 90 | (4,892) | (4,802) |
| Eliminations | (6,094) | 6,094 | - |
| Consolidated | 80,551 | (50,238) | 30,313 |
Note 3 - Taxation
|
| 2009 £000 | 2008 £000 |
| Current tax expense |
|
|
| UK corporation tax payable on profits for the year | 2,180 | 4,442 |
| Adjustment for (over) / under provision in prior periods | (113) | 23 |
|
| 2,067 | 4,465 |
| Deferred tax expense |
|
|
| Arising on: |
|
|
| Origination and reversal of temporary differences | 79 | 89 |
|
| 79 | 89 |
| Total income tax expense | 2,146 | 4,554 |
|
|
|
|
| Reconciliation of tax charge |
|
|
| Profit for the year from continuing operations | 6,762 | 13,408 |
|
|
|
|
| Tax at standard UK tax rate of 28% (2008: 28.5%) | 1,893 | 3,821 |
| Permanently disallowable items | 366 | 710 |
| (Over) / under provision in prior years | (113) | 23 |
| Taxation expense | 2,146 | 4,554 |
£80,000 of the deferred tax charge (2008: £87,000) has been included within the retirement benefit obligation.
Note 4 - Discontinued operations
During 2009 the group wound down and closed its operations in Altrincham, and on 15th October 2009 completed the disposal of Kestrel Electrical Systems Limited. In accordance with IFRS 5 these operations have been classified as discontinued operations and the comparatives for 2008 have been restated to show income generated and expenses incurred by these operations within loss on discontinued operations in the income statement.
The post-tax loss on disposal of discontinued operations was determined as follows:
| Consideration received: | 2009 £000 |
| Cash | 100 |
|
Net assets disposed of: |
|
| Net assets disposed of (other than cash) |
|
| Property, plant and equipment | 69 |
| Inventories | 29 |
| Trade and other receivables | 100 |
| Trade and other payables | (92) |
| Corporation tax liabilities | (8) |
| Obligations under finance leases | (42) |
| Deferred taxation | (2) |
|
| 54 |
| Cash disposed of | 96 |
|
| 150 |
| Pre -tax loss in disposal of discontinued operation | (50) |
| Related tax credit | - |
|
| (50) |
|
|
|
| The net cash inflow comprises: |
|
| Cash received | 100 |
| Cash disposed of | (96) |
|
| 4 |
Note 5 - Earnings per share - continuing operations
The earnings per share figure represents the profit for the year divided by the weighted average number of ordinary shares in issue. The number of ordinary shares for the purpose of this calculation is 39,947,889 (2008: 39,947,889). The profit for the year is as follows:
|
| 2009 £000 | 2008 £000 |
| Profit attributable to equity holders of the company | 4,006 | 8,837 |
| Loss from discontinued operations attributable to equity holders of the company | 610 | 17 |
| Profit from continuing operations attributable to equity holders of the company | 4,616 | 8,854 |
Note 6 - Dividends
|
| 2009 £000 | 2008 £000 |
| Final dividend of 8.75 pence (2008: 8.1 pence) per ordinary share proposed and paid during the year relating to the previous year's results | 3,495 | 3,236 |
| Interim dividend of 4.25 pence (2008: 4.25 pence) per ordinary share paid during the year | 1,698 | 1,698 |
|
| 5,193 | 4,934 |
The directors are proposing a final dividend of 8.75 pence (2008: 8.75 pence) per ordinary share totalling £3,495,000 (2008: £3,495,000). Subject to approval at the Annual General Meeting, the final dividend will be paid on 14th May 2010 to shareholders on the register as at 16th April 2010. The shares will go ex-dividend on 14th April 2010. 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 2009 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 extra's). The last day for election for the final dividend reinvestment is 19th April 2010 and any requests should be made in good time ahead of that date.
Note 7 - 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:
|
| 2009 £000 | 2008 £000 |
| Present value of defined benefit obligations | 28,005 | 18,924 |
| Fair values of scheme assets | (19,728) | (16,233) |
| Deficit in scheme | 8,277 | 2,691 |
| Related deferred tax asset | (2,318) | (753) |
| Liability recognised in the balance sheet | 5,959 | 1,938 |
| Key assumptions used: |
|
|
| Rate of increase in salaries | 4.70% | 3.70% |
| Rate of increase of pensions in payment | 3.25% | 2.40% |
| Discount rate | 5.65% | 6.70% |
| Inflation assumption | 3.70% | 2.70% |
| Expected return on scheme assets | 6.45% | 6.60% |
|
|
|
|
|
Mortality assumptions (years): |
2009 |
2008 |
| Life expectancy at age 65 for current pensioners: |
|
|
| Men | 23.7 | 23.7 |
| Women | 26.8 | 26.8 |
| Life expectancy at age 65 for future pensioners (current age 45) |
|
|
| Men | 24.8 | 24.8 |
| Women | 27.8 | 27.8 |
Note 8 - Notes to the statement of cash flows
| a. Reconciliation of operating profit to net cash inflow from operating activities | 2009 £000 | 2008 £000 |
| Profit / (loss) from operations: |
|
|
| Continuing operations | 6,779 | 12,602 |
| Discontinued operations | (768) | (20) |
| Depreciation charges | 688 | 828 |
| Goodwill impairment charge | 809 | 1,801 |
| Defined benefit pension scheme credit | (485) | (252) |
| (Profit) / loss on sale of fixed assets | (225) | 25 |
| Operating cash flows before movements in working capital | 6,798 | 14,984 |
| Increase in inventories | (81) | (5) |
| Decrease / (increase) in contract balances | 130 | (159) |
| (Increase) / decrease in trade and other receivables | (2,340) | 10,852 |
| (Decrease) / increase in trade and other payables | (3,216) | 3,973 |
| Cash generated by operations | 1,291 | 29,645 |
| Corporation tax paid | (3,835) | (3,179) |
| Interest paid | (42) | (152) |
| Net cash (used in) / generated by operating activities | (2,586) | 26,314 |
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:
|
| 2009 £000 | 2008 £000 |
| Cash and cash equivalents | 12,881 | 34,363 |
| Bank overdrafts | (306) | (4,002) |
|
| 12,575 | 30,361 |
c. Bank deposits
Bank deposits comprise two fixed rate deposits of £5,625,000 and £5,000,000 with initial maturity dates of six months or more, maturing on 2 March 2010 and 19 July 2010, respectively. The deposits earn interest at between 1.5% and 1.6% per annum and the company can access the funds on giving 30 day's written notice.
Note 9 - Related party transactions
The remuneration of key management (including directors) was £5,104,000 (2008: £4,989,000), including termination payments of £544,000 (2008: £nil). Pension contributions in respect of key management (including directors) were £542,000 (2008: £519,000). 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 10 - Subsequent events
On 18th March 2010 the company acquired the entire share capital of D & S (Engineering Facilities) Limited, a facilities management business based in Accrington, specialising in mechanical, electrical and related civil engineering services for an initial cash consideration of £10.6 million, including an escrow amount of £0.5 million due to be released to the vendors following agreement of the final completion accounts. Additional consideration of up to £1.0 million is payable, in the event of certain asset and cash targets being met in the completion accounts, resulting in a total consideration of up to £11.6 million. In light of the cash in D&S (Engineering Facilities) Limited's balance sheet at acquisition, the net cash outlay by T.Clarke is expected to be up to £8.1 million.
Note 11 - Annual General Meeting
The Annual General Meeting will be held at Savoy Place, 2 Savoy Place, London WC2R 0BL on Friday 7th May 2010 at 12 noon.
Statement of directors' responsibilities in respect of the financial information
We confirm that to the best of our knowledge:
(a) the financial information, prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, gives a true and fair view of the assets, liabilities and financial position and profit of the group; and
(b) the business and financial review includes a fair review of the development and performance of the business and the position of the group, together with a description of its principal risks and uncertainties.
On behalf of the board
Russell Race Chairman
Mark Lawrence Chief Executive
Victoria French Finance Director
19th March 2010