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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tclarke Plc | LSE:CTO | London | Ordinary Share | GB0002015021 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 160.00 | 160.00 | 161.00 | 162.00 | 160.00 | 162.00 | 56,544 | 16:35:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Special Trade Contractor,nec | 491M | 6.5M | 0.1230 | 13.09 | 85.09M |
From Apr 2019 to Apr 2024
TIDMCTO
RNS Number : 7129G
TClarke PLC
19 March 2020
TClarke plc - Results for the year ended 31(st) December 2019
FIVE YEARS OF CONTINUOUS IMPROVEMENT
TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its preliminary results for the year ended 31(st) December 2019.
Financial highlights: Change 2019 2018 Revenue +2% GBP334.6m GBP326.8m Operating profit - underlying(1) +16% GBP10.2m GBP8.8m Operating profit - reported +16% GBP10.0m GBP8.6m Operating margin- underlying(1) +11% 3.0% 2.7% Profit before tax - underlying(1) +15% GBP9.2m GBP8.0m Profit before tax - reported +15% GBP9.0m GBP7.8m Net cash No change GBP12.4m GBP12.4m Earnings per share - underlying(2) +22% 18.81p 15.38p Earnings per share - underlying (diluted)(2) +19% 17.90p 14.98p Earnings per share - basic +23% 18.37p 14.99p Final dividend per share +9% 3.65p 3.34p Total dividend per share +10% 4.4p 4.0p Forward order book -2% GBP403m GBP411m
(1) Underlying operating profit, profit before tax and operating margin are stated before amortisation of intangible assets
(2) Underlying earnings per share is calculated by dividing underlying profit after tax by the weighted average number of shares in issue
Iain McCusker , Chairman commented:
"The Group is in great shape. The results for the year were very encouraging and we have an excellent platform from which we will continue to make progress. Clearly these results will be overshadowed by the global Coronavirus pandemic. We as a business continue to follow the UK Government's advice and direction and until the situation stabilises it is not possible to forecast the short-term impact on our industry.
"It is worth reminding our stakeholders that the Group has a proud 130-year history and overcome many challenges. During this time, we have built a first-class reputation for quality and being at the forefront of technological innovation within our sector.
Overall, TClarke is in a robust financial position and we remain optimistic about the long-term future positioning in our marketplace and we are well placed to face the challenges ahead."
-ends-
Date: 19(th) March 2020
For further information contact:
TClarke plc Mark Lawrence Trevor Mitchell Chief Executive Officer Finance Director Tel: 020 7997 7400 www.tclarke.co.uk Cenkos Securities plc (Corporate RMS Partners Broker) Max Hartley (Corporate Finance) Simon Courtenay Nick Searle (Sales) Tel: 020 3735 6551 Tel: 020 7397 8900 www.cenkos.com
Chairman's introduction
2019 was another highly successful year for TClarke. Underlying earnings per share increased by over 22% to 18.81p and underlying operating profit increased by 16% to GBP10.2 million.
I am particularly pleased that the Group achieved its target of 3% operating margin for the year and showed improvement across a number of key financial measures.
The forward order book continues to be very healthy and this, together with the strategic market initiatives which the Group will implement in 2020, gives confidence as to forward revenue and earnings potential. As a result, the Board is recommending a total dividend of 4.4p for the full year, an increase of 10% over 2018. The Board remains committed to a progressive dividend policy.
Whilst we will continue to grow our core business of delivering successful, high-quality, complex projects, we will also be delivering some key market developments in 2020 to meet the growing and changing requirements of our existing and new customer bases. A combined focus on our core business and the delivery of new offerings in 2020, particularly in Technology Solutions and expansion into Europe, provides exciting potential and opportunity for ongoing performance growth.
The TClarke brand is very strong, built upon its reputation for high technical capability, quality, dependability and performance. However, such brand value can only be created and maintained through the high qualities of our people and their engineering capabilities, and by the ongoing relationships with and support of our customers and supply chain. I would like to thank all of them for enabling TClarke to grow and flourish.
Iain McCusker
Chairman
19th March 2020
Chief Executive's report
Last year we celebrated 130 years of TClarke. This year the theme for our Annual Report is 'In Touch With Tomorrow' because whilst 2019 has been a pivotal year we are very much focused on the future.
A starting point for the future and clear measure of our ability to command market share is our forward order book which stands at GBP403 million (2018: GBP411 million). This near record order book has been replenished whilst maintaining our disciplined and selective bidding approach to opportunities.
Sustainable margins
Having achieved our important objective of a 3% margin going forward, we will continue to instill a discipline that ensures we evaluate every potential bid and monitor each phase of our projects to ensure this level of margin is sustained.
Understand our growth strategy
Whilst our margin target remains one of the cornerstones of our strategy, we also have clear objectives that will deliver revenue growth.
In London we will continue to target larger mechanical and 'full service' M&E and technology packages. By way of an example, during 2019 we have been delivering our largest ever mechanical project - the iconic KGX1 project at Kings Cross. Our capacity to deliver M&E projects in London has more than doubled within the last five years.
Last year we reported exceptional growth in technologies, and this looks set to continue in the coming year. Our offerings in this sector are extensive and comprehensive. To complement our M&E installations we now offer our clients added value packages such as IT Networks, audio visual, fire and security, building control installations as well as a suite of products to make buildings more efficient and fit for the 21st century. Our in-house DfMA (Designed for Manufacture and Assembly) facility at Stansted is a TClarke USP in what we can offer our client in terms of offsite precision manufacturing embracing modular innovation and digital solutions.
Outside London our regional businesses have been targeting larger M&E projects which fit our margin profile, taking our existing client partnerships into our new regions such as Manchester and Liverpool. Our offices in the North of the UK are particularly well positioned to take advantage of planned infrastructure investment and regeneration that schemes such as HS2 will bring to these areas.
Capitalising on our extensive UK experience in 2019, we launched our European data centres division. The global demand for data centres and for building services teams that can deliver them will dwarf so many areas of infrastructure development in the next ten years. The European market is highly attractive, we have the proven skillsets, we also have long-term partners in the sector who have been actively encouraging us to participate in these markets. Our bidding teams have been actively targeting projects in selective European territories as well as numerous opportunities in the UK and we are confident that these will be a feature in our future order book.
These are just some examples of the strategies that we are following that have the ability to create a significant, permanent uplift in our revenue figures. Each is framed by our margin target, risk profile and ability to deliver with our own resources to the quality standards we require; in other words, these are well-planned and disciplined strategies.
See how construction markets are moving our way
Travelling through London you will see that TClarke is truly the contractor of choice on the most significant schemes under construction including projects at Battersea Power Station, One Nine Elms, The Peninsula Hotel, KGX1 in Kings Cross and Oxford House in Oxford Street. We are also involved with no fewer than four major schemes in the heart of the City at 8, 22, 100 and 150 Bishopsgate. Clients need to lock in the resource of skilled people to deliver their complex projects, which is why we are pleased they look to our teams here at TClarke.
Understand the central value of our people strategy
This year the first cohort of 27 young leaders completed our Future Leaders programme and the second cohort of 11 began their three years of development, networking and training. The reason why TClarke in 2019 won 90% of its work from repeat clients is because of the exceptional quality of our teams. Our people deliver quality, collaboration, safety and expertise. We directly employ, enabling lifelong careers from which the business benefits hugely. In 2019 we introduced a wide series of measures and made investments to improve the support we give our people - from a new Employee Hub, to mindfulness sessions, to the setting up of a strengthened HR team led by our HR Director, Mick Jobling. Succession planning and the ongoing flow of talent into the business are key and 2019 has seen major progress in both areas. I am particularly proud of leading a business where we currently have 244 people employed in their apprenticeship or studying for degrees or professional qualifications - representing 17.8% of our workforce against the construction industry as a whole which sees 5% as the gold standard.
Feel the confidence
It is pleasing that there is no shortage of new opportunities being released in our five target markets. There is genuine confidence across TClarke and I congratulate the people of TClarke, who have understood the strategy and delivered it, maintaining and building our reputation, day by day. They deserve enormous credit and the highest possible standards and commitment to safety; I am pleased to conclude my report by reconfirming the fact that safety is our overriding priority and focus. Health, safety and wellbeing matter more than anything else.
Mark Lawrence
Group Chief Executive Officer
19th March 2020
Group Financial review
The Group has a track record of delivering stable and improving results. Over the last five years underlying operating profit has risen each year from GBP4.6 million in 2015 to GBP10.2 million in 2019. Underlying earnings per share has risen from 7.11p in 2015 to 18.81p in 2019.
Performance
The Group's underlying performance for the year ended 31st December 2019 was strong, resulting in an increase in earnings per share of 22.3% to 18.81p (2018: 15.38p). This growth has been as a result of TClarke achieving an operating margin of 3% (2018: 2.7%) whilst at the same time growing revenues by 2% to GBP334.6 million (2018: GBP326.8 million). The statutory operating profit was GBP10.0 million (2018: GBP8.6 million). As in 2018, all regions were profitable with London remaining the core of the business delivering a reported profit of GBP8.2 million (2018: GBP7.2 million) and an operating margin of 4.1% (2018: 3.7%).
Finance costs increased to GBP1.0 million (2018: GBP0.8 million) as a result of an increase in the Group's defined benefit pension scheme interest charge of GBP0.1 million to GBP0.7 million (2018: GBP0.6 million) and an interest charge of GBP0.1 million following the adoption of IFRS 16.
The tax charge for the year is GBP1.2 million (2018: GBP1.6 million), which equated to an effective tax rate of 13%. This is lower than the UK statutory rate of 19 % due to utilising brought forward Eton tax losses, Eton RDEC claim and prior year tax adjustments. TClarke maintains an open and transparent working relationship with HMRC.
The Board is proposing a final dividend of 3.65p (2018: 3.34p), with the total dividend for the year increasing by 10% to 4.4p (2018: 4.0p). The dividend is covered four times by underlying earnings. The increase in dividends is in line with TClarke's progressive dividend policy.
Year-end cash was GBP12.4 million (2018: GBP12.4 million) with the Group being free of any debt.
We move into 2020 with a forward order book at GBP403 million (2018: GBP411 million) providing excellent revenue visibility.
Key Performance Measures
Hot Features
Premium
2019 2018
GBPm GBPm
-------------------- ------ ------
Revenue 334.6 326.8
-------------------- ------ ------
Operating profit
- Underlying(1) 10.2 8.8
- Reported 10.0 8.6
-------------------- ------ ------
Profit before tax
- Underlying(1) 9.2 8.0
- Reported 9.0 7.8
-------------------- ------ ------
Profit after tax
- Underlying(1) 8.0 6.4
- Reported 7.8 6.2
-------------------- ------ ------
Profit for the year 7.8 6.2
-------------------- ------ ------
Earnings per share
- Underlying(2) 18.81p 15.38p
- Reported 18.37p 14.99p
-------------------- ------ ------
Dividend per share 4.4p 4.0p
-------------------- ------ ------
1. Underlying operating profit, profit before tax and operating margin are stated before amortisation of intangible assets.
2. Underlying earnings per share is calculated by dividing underlying profit after tax by the weighted average number of shares in issue.
Forward Order Book
2019 2018 %
Market sector GBPm GBPm change
---------------------- ----- ----- ------
Infrastructure 89.0 65.1 37%
Residential & Hotels 110.0 96.2 14%
Technologies 50.4 53.7 -6%
M&E Contracting 141.9 188.1 -25%
Facilities Management 11.7 7.9 48%
---------------------- ----- ----- ------
Forward Order Book comprises of jobs which are secured through contracts or letters of intent.
London
Revenue from our London operations increased by 2% to GBP201 million (2018: GBP196.5 million), generating an underlying profit of GBP8.2 million (2018: GBP7.2 million). Underlying operating margin was 4.1% (2018: 3.7%).
For 2020 the region is engaged on a number of high-profile shell and core commercial developments, all of which offer future fit-out opportunities. A number of areas continue to be regenerated and offer large -scale mixed commercial and residential opportunities such as the International Quarter London, Battersea Power Station, Kings Cross and the area of Bishopsgate, London.
London is currently bidding a number of data centre opportunities both in the UK and Europe.
In addition, TClarke has an exclusive contract to sell, install and maintain the Gooee suite of products offering both initial and recurring revenue streams.
UK South
Revenue from UK South fell by 9% to GBP66.3 million (2018: GBP73.0 million) but the focus on higher-quality projects has resulted in profits doubling to GBP3.6 million (2018: GBP1.8 million).The region has developed a high-quality customer base providing a significant quantity of repeat business.
The region is particularly strong in Infrastructure with many projects being undertaken in defence, education and healthcare.
Our established FM operation in Birmingham is performing well and has a pipeline of opportunities, many with repeat customers.
UK North
Revenue increased by 15% to GBP67.3 million (2018: GBP57.3 million), generating an underlying profit of GBP1.4 million (2018: GBP2.8 million). Within the region, Scotland's residential work performed strongly along with the delivery of a number of educational projects by the Leeds office. Our recently opened offices in Liverpool and Manchester have yet to contribute significant revenue but have a number of exciting opportunities for 2020 and beyond.
Pension obligations
The triennial valuation of the pension scheme at 31st December 2018 showed a deficit of GBP24.9 million, representing a funding level of 59% (2015 valuation: deficit GBP14.9 million, funding level 67%). The principal reason for the increase in deficit is the fall in long-term interest rates over the period.
The Group has been pursuing an agreed deficit reduction plan over a number of years; however, market factors have meant that the deficit has not been reduced as intended and the cost of funding current pension commitments has increased. Following agreement of the 2018 valuation, the Group has agreed to continue the deficit reduction contributions of GBP1.5 million per annum. The recovery plan period is 12 years. The Group continues to provide security to the pension scheme in the form of a charge over property assets up to a combined market value of GBP3.1 million.
From 1st April 2020 the future service contribution increased to 22.4% of pensionable payroll (including employee contributions). Employee contributions will increase from 10% to 12% from 1st April 2020.
The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.
The scheme benefited in the year from settlements accounted for in accordance with IAS19 totalling GBP3.0 million (2018: nil). The Group is contributing GBP1.5 million towards the cost of the settlements.
In accordance with IAS 19 'Employee benefits', an actuarial loss net of tax of GBP5.7 million (2018: gain of GBP0.7 million), has been recognised in reserves, with the pension scheme deficit rising by GBP3.4 million to GBP26.4 million (2018: GBP23.0 million).
Cash flow and funding
Cash balances totalled GBP12.4 million at 31st December 2019 (2018: GBP12.4 million).
The Group has a GBP15.0 million revolving credit facility, which is committed until 31st August 2022, and a GBP10.0 million overdraft facility, renewable annually. Interest on overdrawn balances is charged at 2.0% above base rate, and interest on balances drawn down under the revolving credit facility is charged at 1.7% above LIBOR, fixed for the duration of each drawdown (typically three months). The Group was compliant with the terms of the facilities throughout the year ended 31st December 2019 and the Board's detailed projections demonstrate that the Group will continue to meet its obligations in the future.
The Board's detailed cash flow projections include an allowance for the impact of a change in the VAT regime from 1st October 2020. From this date the Government is planning to introduce a VAT domestic reverse charge for building and construction services. Under this scheme TClarke will continue to charge VAT to end customers but will no longer be able to charge VAT to contractors and will not pay VAT on costs incurred with subcontractors.
In addition, the projections include an estimate for the Group's contribution towards settlements arising from the Group's defined benefit pension scheme during 2020 and the investment made into Gooee, all of which is in cash.
The Board's projections show a healthy cash position after taking account of these factors.
The Group also has in place GBP40.1 million of bonding facilities, of which GBP21.7 million were unutilised at 31st December 2019.
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 structure. Shareholders' equity is GBP22.9 million (2018: GBP22.1 million).
Goodwill and intangible assets were GBP25.5 million (2018: GBP25.7 million). The Board has undertaken a rigorous impairment review in respect of the intangible assets at 31st December 2019 and concluded that no impairment is necessary.
Accounting policies
The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union.
The Group has adopted IFRS 16 for the first time in the financial statements for the year ended 31st December 2019. IFRS 16 removes the distinction between 'operating' and 'finance' lease and, with this, leases which would have been previously deemed as 'operating' - based on an assessment of the balance of risk and reward transferred - are now recognised on the balance sheet with the creation of a 'right- of-use' asset and a concomitant lease liability reflecting future lease payments.
Adopting IFRS 16 has resulted in:
-- gross assets and gross liabilities increasing with the creation of the 'right of use assets' (recognised within 'property, plant and equipment' - GBP4.1 million impact) and corresponding lease liabilities (shown as 'obligations under leases'-GBP4.2 million impact);
-- depreciation and interest increased by GBP1.4 million and GBP0.1 million respectively; -- rental charges decreased by GBP1.4 million.
The lease payments for low-value and short-term leases are expensed over a straight-line in accordance with IFRS 16.6.
Financial risk management
The Group's main financial assets are contract and other trade receivables, cash and bank balances. These assets represent the Group's main exposure to credit risk, which is the risk that a counterparty will fail to discharge its obligations, resulting in financial loss to the Group. The Group may also be exposed to financial and reputational risk through the failure of a subcontractor or supplier.
The financial strength of counterparties is considered prior to signing contracts and reviewed as contracts progress where there are indications that a counterparty may be experiencing financial difficulty. Procedures include the use of credit agencies to check the creditworthiness of existing and new clients and the use of approved suppliers' lists and Group-wide framework agreements with key suppliers.
Trevor Mitchell
Finance Director
19th March 2020
Consolidated income statement
for the year ended 31st December 2019
2019 2018
------------------------------- -------------------------------
Non- Non-
Underlying underlying Underlying underlying
items items Total items items Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Revenue 3 334.6 - 334.6 326.8 - 326.8
Cost of sales (296.1) - (296.1) (287.6) - (287.6)
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Gross profit 38.5 - 38.5 39.2 - 39.2
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Administrative expenses
Amortisation of intangible assets - (0.2) (0.2) - (0.2) (0.2)
Other administrative expenses (28.3) - (28.3) (30.4) - (30.4)
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Total administrative expenses (28.3) (0.2) (28.5) (30.4) (0.2) (30.6)
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Operating profit 10.2 (0.2) 10.0 8.8 (0.2) 8.6
Finance costs (1.0) - (1.0) (0.8) - (0.8)
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Profit before taxation 9.2 (0.2) 9.0 8.0 (0.2) 7.8
Taxation 4 (1.2) - (1.2) (1.6) - (1.6)
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Profit for the financial year 8.0 (0.2) 7.8 6.4 (0.2) 6.2
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Earnings per share
Attributable to owners of TClarke plc
Basic 5 18.81p (0.44)p 18.37p 15.38p (0.39)p 14.99p
Diluted 5 17.90p (0.41)p 17.49p 14.98p (0.37)p 14.61p
-------------------------------------- ---- ---------- ---------- ------- ---------- ---------- -------
Consolidated statement of comprehensive income
for the year ended 31st December 2019
2019 2018
GBPm GBPm
----------------------------------------------------------------- ----- -----
Profit for the year 7.8 6.2
Items that will not be reclassified to the income statement
Actuarial (loss)/gain on defined benefit pension scheme (6.9) 0.8
Revaluation of freehold property 0.4 -
Deferred tax relating to items that will not be reclassified 1.2 (0.1)
Total other comprehensive (loss)/income for the year, net of tax (5.3) 0.7
----------------------------------------------------------------- ----- -----
Total comprehensive income for the year 2.5 6.9
----------------------------------------------------------------- ----- -----
Consolidated statement of financial position
as at 31st December 2019
2019 2018
Note GBPm GBPm
-------------------------------------------------------- ---- ------- -------
Non-current assets
Intangible assets 25.5 25.7
Property, plant and equipment 9.0 4.9
Deferred tax assets 4.8 3.9
-------------------------------------------------------- ---- ------- -------
Total non-current assets 39.3 34.5
-------------------------------------------------------- ---- ------- -------
Current assets
Inventories 0.2 0.3
Amounts due from customers under construction contracts 44.6 38.7
Trade and other receivables 41.9 56.4
Cash and cash equivalents 8 12.4 12.4
-------------------------------------------------------- ---- ------- -------
Total current assets 99.1 107.8
-------------------------------------------------------- ---- ------- -------
Total assets 138.4 142.3
-------------------------------------------------------- ---- ------- -------
Current liabilities
Amounts due to customers under construction contracts (0.1) (8.4)
Trade and other payables (84.6) (87.8)
Current tax liabilities (0.2) (1.0)
Obligations under leases (1.4) -
-------------------------------------------------------- ---- ------- -------
Total current liabilities (86.3) (97.2)
-------------------------------------------------------- ---- ------- -------
Net current assets 12.8 10.6
-------------------------------------------------------- ---- ------- -------
Non-current liabilities
Obligations under leases (2.8) -
Retirement benefit obligations 7 (26.4) (23.0)
-------------------------------------------------------- ---- ------- -------
Total non-current liabilities (29.2) (23.0)
-------------------------------------------------------- ---- ------- -------
Total liabilities (115.5) (120.2)
-------------------------------------------------------- ---- ------- -------
Total net assets 22.9 22.1
-------------------------------------------------------- ---- ------- -------
Equity attributable to owners of the parent
Share capital 4.3 4.3
Share premium 3.8 3.7
ESOT reserve (2.0) (1.4)
Revaluation reserve 0.9 0.5
Retained earnings 15.9 15.0
-------------------------------------------------------- ---- ------- -------
Total equity 22.9 22.1 -------------------------------------------------------- ---- ------- -------
Consolidated statement of cash flows
for the year ended 31st December 2019
2019 2018
Note GBPm GBPm
------------------------------------------------------- ---- ----- -----
Net cash generated from operating activities 8 3.9 3.5
------------------------------------------------------- ---- ----- -----
Investing activities
Acquisition of subsidiary, net of cash acquired - (0.5)
Purchase of property, plant and equipment (0.3) (0.5)
------------------------------------------------------- ---- ----- -----
Net cash used in investing activities (0.3) (1.0)
------------------------------------------------------- ---- ----- -----
Financing activities
New shares issuance 0.1 0.7
Facility fee (0.1) (0.2)
Repayment of bank borrowing - (5.0)
Equity dividends paid (1.7) (1.5)
Acquisition of shares by ESOT (0.6) (0.7)
Repayment of lease obligations (1.3) (0.1)
------------------------------------------------------- ---- ----- -----
Net cash (used in)/generated from financing activities (3.6) (6.8)
------------------------------------------------------- ---- ----- -----
Net (decrease)/increase in cash and cash equivalents - (4.3)
Cash and cash equivalents at the beginning of the year 8 12.4 16.7
------------------------------------------------------- ---- ----- -----
Cash and cash equivalents at the end of the year 8 12.4 12.4
------------------------------------------------------- ---- ----- -----
Consolidated statement of changes in equity
for the year ended 31st December 2019
Attributable to owners of the parent
Share Share ESOT share Revaluation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
At 1st January 2018 4.2 3.1 (0.8) 0.5 9.4 16.4
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Comprehensive income
Profit for the year - - - - 6.2 6.2
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Other comprehensive income
Actuarial gain on retirement benefit obligation - - - - 0.8 0.8
Deferred income tax on actuarial gain on retirement
benefit obligation - - - - (0.1) (0.1)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total other comprehensive income - - - - 0.7 0.7
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total comprehensive income - - - - 6.9 6.9
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Transactions with owners
New Shares 0.1 0.6 - - - 0.7
Share-based payment credit - - - - 0.2 0.2
Shares acquired by ESOT - - (0.7) - - (0.7)
Shares distributed by ESOT - - 0.1 - - 0.1
Dividends paid - - - - (1.5) (1.5)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total transactions with owners 0.1 0.6 (0.6) - (1.3) (1.2)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
At 31st December 2018 4.3 3.7 (1.4) 0.5 15.0 22.1
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Comprehensive income/(expense)
Profit for the year - - - - 7.8 7.8
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Other comprehensive (expense)/income
Actuarial loss on retirement benefit obligation - - - - (6.9) (6.9)
Deferred income tax on actuarial loss on retirement
benefit obligation - - - - 1.2 1.2
Revaluation of freehold property, net of tax - - - 0.4 - 0.4
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total other comprehensive expense - - - 0.4 (5.7) (5.3)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total comprehensive income - - - 0.4 2.1 2.5
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Transactions with owners
New shares - 0.1 - - - 0.1
Share-based payment credit - - - - 0.5 0.5
Shares acquired by ESOT - - (0.6) - - (0.6)
Dividends paid - - - - (1.7) (1.7)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Total transactions with owners - (1.2) (1.7)
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
At 31st December 2019 4.3 3.8 (2.0) 0.9 15.9 22.9
---------------------------------------------------------- ------- ------- ---------- ----------- -------- -----
Notes to the preliminary financial information
Note 1 - Basis of preparation
TClarke plc is a public limited company listed on the London Stock Exchange, incorporated and domiciled in the United Kingdom. The nature of the Group's operations and its principal activities is providing electrical and mechanical contracting and related services to the construction industry and end users. The Company is limited by shares.
This preliminary financial information has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority, and the principles of International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and has been prepared on a going concern basis under the historic cost convention as modified by the revaluation of land and buildings.
This preliminary financial information does not constitute the statutory financial statements of the Group. The financial statements themselves were approved by the Board on 19(th) March 2020. The report of the auditor on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006. The Annual Report and Financial Statements will be filed with the Registrar in due course.
The accounting policies adopted are in line with those in previous financial years, with the exception of IFRS16 ("Leases") which has been adopted for the first time by the Group, with effect from 1 January 2019.
IFRS 16: Leases
Lessee accounting
IFRS 16 removes the distinction between 'operating' and 'finance' leases and, with this, leases which would have been previously deemed as 'operating' - based on an assessment of the balance of risk and reward transferred - are now recognised on the balance sheet with the creation of a 'right-of-use' asset and a concomitant lease liability reflecting future lease payments. The risk/reward distinction criteria of IAS 17 is removed and the aforementioned treatment applies to all lease contracts where it is deemed the lessee has the right to direct an identified asset's use and to obtain substantially all the economic benefits from that use (termed 'control' under IFRS 16). On the income statement, the operating lease charges which would have been recognised under IAS 17 are replaced by an IFRS 16 depreciation and interest charge.
Lessor accounting
As a result of adopting IFRS 16, lessor accounting has remained unchanged. Income is recognised on a straight-line basis over the term of the relevant lease, as under IAS 17.
Impact of accounting policy change
The company 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. The cumulative impact of initial recognition of IFRS 16 is immaterial and thus there is no adjustment through opening retaining earnings.
The lease payments for low-value and short-terms lease are expensed over a straight-line in accordance with IFRS 16.6.
On initial adoption of IFRS 16 lease liabilities of GBP4.3 million were recognised. This reconciles to the operating lease commitments presented in the prior period financial statements as shown below:
GBPm
----------------------------------------------------------------------------- -----
As at 31st December 2018 - operating lease commitments 5.2
- recognition exemption for short-term leases (0.5)
- discount at incremental borrowing rate of 2.4% (0.4)
----------------------------------------------------------------------------- -----
As at 1st January 2019 - lease liabilities recognised on initial application 4.3
----------------------------------------------------------------------------- -----
As at 31st December 2019, adopting IFRS 16 has resulted in:
-- gross assets and gross liabilities increasing with the creation of the 'right of use assets' (recognised within "property, plant and equipment" - GBP4.1m impact) and corresponding lease liabilities (shown as "obligations under leases" - GBP4.2m impact);
-- depreciation and interest increased by GBP1.4 million and GBP0.1 million respectively; -- rental charges decreased by GBP1.4 million.
Note 2 - Significant judgements and sources of estimation uncertainty
The preparation of this financial information in conformity with IFRS as adopted by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information are set out below. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Revenue and margin
The recognition of revenue and profit on construction contracts is a key source of estimation uncertainty due to the difficulty of forecasting the final costs to be incurred on a contract in progress and the process whereby applications are made during the course of the contract with variations, which can be significant, often being agreed as part of the final account negotiation.
Commercial reviews of all live contracts are undertaken on a regular basis, with all significant contracts being reviewed on a monthly basis. The Directors also take into account the recoverability of contract balances and trade receivables, and allowances are made for those balances which are considered to be impaired. The Group only recognises revenue once there is a formal contractual entitlement and the recognition criteria of IFRS 15 have been met. At 31 December 2019 the Group had approximately GBP31 million of formally instructed, unagreed variations, of which GBP19 million had been taken to revenue. It is the Group's policy not to recognise variations in full until formally agreed.
Impairment of goodwill and investments
Determining whether goodwill is impaired requires an estimation of the value in use of the cash -generating unit giving rise to the goodwill, including the estimation of the timing and amount of future cash flows generated by the cash-generating unit and a suitable discount rate. The estimation of the value in use is also used to assess the carrying value of investments in the relevant subsidiaries in the Company's financial statements.
Retirement benefit obligations
The costs, assets and liabilities of the defined benefit scheme operated by the Group are determined using methods relying on actuarial estimates and assumptions, which are largely dependent on factors outside the control of the Group. Details of the key assumptions are set out in note 7, and include the discount rate, expected return on assets, rate of inflation and mortality rates. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used may have a significant effect on the income statement, statement of comprehensive income and the statement of financial position.
Note 3 - Segment information
(i) Reportable segments
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 Board who represent the "Chief Operating Decision-Maker" as per IFRS 8. The measurement basis used to assess the performance of the divisions is underlying operating profit, stated before amortisation of intangible assets and other non-underlying items.
This segmentation differs from that which was present in the most recent annual financial statements in which there were four geographical segments, as this is in line with how we now manage the business. Prior period information has been restated in accordance with the current reporting segment lines.
All transactions between segments are undertaken on normal commercial terms. All the Group's operations are carried out within the United Kingdom, and there is no significant difference between revenue based on the location of assets and revenue based on location of customers. The accounting policies for the reportable segments are the same as the Group's accounting policies disclosed in note 1. Segmental information is based on internal management reporting.
(ii) Segment information and revenue analysis - year ended 31st December 2019
Group costs
and
London UK South UK North Unallocated Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ -------- -------- ----------- -----
Revenue from contracts with customers 201.0 66.3 67.3 - 334.6
-------------------------------------- ------ -------- -------- ----------- -----
Underlying operating profit 8.2 3.6 1.4 (3.0) 10.2
Amortisation of intangibles - - (0.2) - (0.2)
-------------------------------------- ------ -------- -------- ----------- -----
Operating profit 8.2 3.6 1.2 (3.0) 10
Finance costs - - - (1.0) (1.0)
-------------------------------------- ------ -------- -------- ----------- -----
Profit before tax 8.2 3.6 1.2 (4.0) 9.0
Taxation expenses - - - (1.2) (1.2)
-------------------------------------- ------ -------- -------- ----------- -----
Profit for the year 8.2 3.6 1.2 (5.2) 7.8
-------------------------------------- ------ -------- -------- ----------- -----
London UK South UK North Total
GBPm GBPm GBPm GBPm
------------------------------------- ------ -------- -------- -----
Business sector
Facilities Management and Frameworks 2.7 11.6 14.9 29.2
Infrastructure 14.2 23.4 18.7 56.3
M&E Contracting 112.7 25.4 9.8 147.9
Residential & Hotels 26.9 5.5 23.4 55.8
Technologies 44.5 0.4 0.5 45.4
-------------------------------------- ------ -------- -------- -----
Total revenue 201.0 66.3 67.3 334.6
-------------------------------------- ------ -------- -------- -----
(iii) Segment information and revenue analysis - year ended 31st December 2018
Group costs
and
London UK South UK North Unallocated Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ------ -------- -------- ----------- -----
Revenue from contracts with customers 196.5 73.0 57.3 - 326.8
-------------------------------------- ------ -------- -------- ----------- -----
Underlying operating profit 7.2 1.8 2.8 (3.0) 8.8
Amortisation of intangibles - 0 (0.2) - (0.2)
-------------------------------------- ------ -------- -------- ----------- -----
Operating profit 7.2 1.8 2.6 (3.0) 8.6
Finance costs - - - (0.8) (0.8)
-------------------------------------- ------ -------- -------- ----------- -----
Profit before tax 7.2 1.8 2.6 (3.8) 7.8
Taxation expenses - - - (1.6) (1.6)
-------------------------------------- ------ -------- -------- ----------- -----
Profit for the year 7.2 1.8 2.6 (5.4) 6.2
-------------------------------------- ------ -------- -------- ----------- -----
London UK South UK North Total
GBPm GBPm GBPm GBPm
------------------------------------- ------ -------- -------- -----
Business sector
------------------------------------- ------ -------- -------- -----
Facilities Management and Frameworks 1.6 7.0 14.0 22.6
Infrastructure 13.8 29.6 12.5 55.9
M&E Contracting 137.7 26.1 10.5 174.3
Residential & Hotels 1.4 10.0 19.7 31.1
Technologies 42.0 0.3 0.6 42.9
-------------------------------------- ------ -------- -------- -----
Total revenue 196.5 73.0 57.3 326.8
-------------------------------------- ------ -------- -------- -----
Note 4 - Taxation
2019 2018
GBPm GBPm
--------------------------------------------------- ----- -----
Current tax expense
UK corporation tax payable on profits for the year 1.2 1.7
Adjustment in relation to prior years (0.4) -
--------------------------------------------------- ----- -----
Deferred tax debit/(credit)
Arising on: -
Origination and reversal of timing differences 0.4 (0.1)
--------------------------------------------------- ----- -----
Total income tax expense 1.2 1.6
--------------------------------------------------- ----- -----
Reconciliation of tax charge
Profit before tax for the year 9.0 7.8
--------------------------------------------------- ----- -----
Tax at standard UK tax rate of 19% (2018: 19%) 1.7 1.5
Tax effect of:
Adjustment in relation to prior years (0.4) -
Utilisation of losses brought forward (0.1) -
Permanently disallowed items - 0.1
--------------------------------------------------- ----- -----
Total income tax expense 1.2 1.6
--------------------------------------------------- ----- -----
2019 2018
GBPm GBPm
------------------------------------------------------------ ----- ----
Income tax (credited)/debited to other comprehensive income (1.2) 0.1
------------------------------------------------------------ ----- ----
A reduction in the main rate of corporation tax to 17% from 1st April 2020 had been substantively enacted at 31st December 2018 for the purposes of IAS 12 'Income Taxes'. Deferred tax balances have therefore been assessed using an income tax rate of 17%, taking into account the period over which temporary differences are expected to reverse. During the budget on 11 March 2020 the Chancellor of the Exchequer announced that the main rate of corporation tax from 1 April 2020 would be maintained at 19%. As this change had not been substantively enacted at the balance sheet date it has not been reflected in the calculation of the deferred tax balances.
Note 5 - Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of Ordinary shares in issue during the year.
2019 2018
GBPm GBPm
----------------------------------------------------------- ------ ------
Earnings:
Profit attributable to owners of the Company 7.8 6.2
----------------------------------------------------------- ------ ------
Weighted average number of Ordinary shares in issue (000s) 42,145 41,531
----------------------------------------------------------- ------ ------
Basic earnings per share 18.37p 14.99p
----------------------------------------------------------- ------ ------
(ii) 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.
For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
2019 2018
GBPm GBPm
--------------------------------------------------------------------------------- ------ ------
Earnings:
Profit attributable to owners of the Company 7.8 6.2
--------------------------------------------------------------------------------- ------ ------
Weighted average number of Ordinary shares in issue (000s) 42,145 41,531
Adjustments:
Savings Related Share Option Schemes 474 218
Equity Incentive Plan:
Conditional share awards 1,654 873
Weighted average number of Ordinary shares for diluted earnings per share (000s) 44,273 42,622
--------------------------------------------------------------------------------- ------ ------
Diluted earnings per share 17.49p 14.61p
--------------------------------------------------------------------------------- ------ ------
(iii) Underlying earnings per share
Underlying earnings per share represents profit for the year adjusted for amortisation of intangible assets and other non-underlying items and the tax effect of these items, divided by the weighted average number of shares in issue. Underlying earnings is the basis on which the performance of the operating divisions of the business is measured.
2019 2018
GBPm GBPm
--------------------------------------------------------------------------------- ------ ------
Profit attributable to owners of the Company 7.8 6.2
Adjustments:
Amortisation of intangible assets 0.2 0.2
Underlying earnings 8.0 6.4
--------------------------------------------------------------------------------- ------ ------
Weighted average number of Ordinary shares in issue (000s) 42,145 41,531
Adjustments:
Savings Related Share Option Schemes 474 218
Equity Incentive Plan:
Conditional share awards 1,654 873
Weighted average number of Ordinary shares for diluted earnings per share (000s) 44,273 42,622
--------------------------------------------------------------------------------- ------ ------
Diluted underlying earnings per share 17.90p 14.98p
--------------------------------------------------------------------------------- ------ ------
Basic underlying earnings per share 18.81p 15.38p
--------------------------------------------------------------------------------- ------ ------
Note 6 - Dividends
2019 2018
GBPm GBPm
Final dividend of 3.34p (2018: 2.90p) per ordinary share
proposed and paid during the year relating to the previous
year's results 1.4 1.2
Interim dividend of 0.75p (2018: 0.66p) per ordinary share
paid during the year 0.3 0.3
------ -------
Total 1.7 1.5
------ -------
The Directors are proposing a final dividend of 3.65p (2018: 3.34p) per ordinary share totalling GBP1.6 million (2018: GBP1.4 million). Subject to approval at the Annual General Meeting, the final dividend will be paid on 22nd May 2020 to shareholders on the register as at 24th April 2020. The shares will go ex-dividend on 23rd April 2020. 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 2019 final payment, may do so by contacting Link Asset Services on 0371 664 0381. The last day for election for the final dividend reinvestment is 8th May 2020.
Note 7 - Pension commitments
The present value of the defined benefit obligation, the related current service cost and the past service cost were measured using the projected unit credit method. The amounts recognised in the consolidated statement of financial position are as follows:
2019 2018
GBPm GBPm
------------------------------------ ------ ------
Present value of funded obligations 70.7 58.8
Fair value of plan assets (44.3) (35.8)
------------------------------------ ------ ------
Deficit of funded plans 26.4 23.0
------------------------------------ ------ ------
Key assumptions used:
2019 2018
% %
---------------------------------------- ---- ----
Rate of increase in salaries 2.45 2.65
Rate of increase of pensions in payment 3.10 3.10
Discount rate 2.10 3.00
Inflation assumption 3.15 3.35
---------------------------------------- ---- ----
2019 2018
The mortality assumptions used in the IAS 19 valuation were: Years Years
----------------------------------------------------------------- ----- -----
Life expectancy at age 65 for current pensioners
- Men 21.7 21.7
- Women 23.9 23.9
Life expectancy at age 65 for future pensioners (current age 45)
- Men 22.7 22.7
- Women 25.0 25.2
----------------------------------------------------------------- ----- -----
Note 8 - Notes to the statement of cash flows
(i) Reconciliation of operating profit to net cash (outflow)/inflow from operating activities
2019 2018
GBPm GBPm
------------------------------------------------------------- ------ -----
Operating profit 10.0 8.6
Depreciation charges 2.1 0.7
Equity-settled share-based payment expense 0.5 0.3
Amortisation of intangible assets 0.2 0.2
Additional pension contributions (1.5) -
Defined benefit pension scheme credit (1.3) (0.2)
------------------------------------------------------------- ------ -----
Operating cash flows before movement in working capital 10.0 9.6
Movement in inventories 0.1 0.2
(Increase)/decrease in contract balances (14.2) 2.9
Decrease/(increase) in operating trade and other receivables 14.4 (1.3)
(Decrease)/increase in operating trade and other payables (4.6) (5.2)
------------------------------------------------------------- ------ -----
Cash generated from operations 5.7 6.2
Corporation tax paid (1.5) (2.4)
Interest paid (0.3) (0.3)
------------------------------------------------------------- ------ -----
Net cash generated from operating activities 3.9 3.5
------------------------------------------------------------- ------ -----
(ii) 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.
2019 2018
GBPm GBPm
-------------------------------------------- ---------------------- -------
Cash and cash equivalents 12.4 12.4
-------------------------------------------- ---------------------- -------
Note 9 - Related party transactions
(i) Directors' remuneration
2019 2018
GBPm GBPm
------------------------------------------------------ ---- ----
Salaries, fees and other short-term employee benefits 2.1 2.2
Termination benefits - 0.3
Share-based payment charge 0.3 0.1
Post-employment benefits 0.7 0.2
------------------------------------------------------ ---- ----
Total 3.1 2.8
------------------------------------------------------ ---- ----
Further disclosures, including details of the highest-paid Director, are included in the Directors' remuneration report on pages in the latest annual report.
(ii) Key management remuneration
Compensation payable to key management for employee services is shown below. Key management represents members of the Group Management Board (excluding Directors).
2019 2018
GBPm GBPm
------------------------------------------------------ ---- ----
Salaries, fees and other short-term employee benefits 1.4 1.1
Share-based payment charge 0.1 0.1
Post-employment benefits 0.2 0.1
------------------------------------------------------ ---- ----
Total 1.7 1.3
------------------------------------------------------ ---- ----
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.
Note 10 - Annual General Meeting
The 108(th) Annual General Meeting will be held at 200 Aldersgate, St Pauls, London EC1A 4HD on Wednesday 6(th) May 2020 at 10.00 am.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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