TIDMCTO
RNS Number : 6775A
Clarke(T.) PLC
28 March 2017
TClarke plc - Results for the year ended 31(st) December
2016
Financial highlights: Change 2016 2015
Revenue from continuing +15% GBP278.6m GBP242.4m
operations
Operating profit - underlying(1,2) +35% GBP6.9m GBP5.1m
Operating profit - reported - GBP4.4m GBP4.4m
Operating margin- underlying(1,2) +19% 2.5% 2.1%
Profit before tax from +48% GBP6.2m GBP4.2m
continuing operations -
underlying(1,2)
Profit before tax from +6% GBP3.7m GBP3.5m
continuing operations -
reported
Net cash +39% GBP9.3m GBP6.7m
Earnings per share - underlying(2,3) +42% 11.60p 8.16p
Earnings per share - underlying
(diluted)(2,3) +42% 11.20p 7.88p
Earnings per share - basic +4,092% 5.45p 0.13p
Final dividend per share +4% 2.70p 2.60p
Total dividend per share +3% 3.20p 3.10p
Forward order book +10% GBP330m GBP300m
(1) Underlying profit is profit from continuing operations
adjusted for amortisation of intangible assets and non-recurring
costs (see note 4 to the financial statements)
(2) Prior year re-presented to reclassify certain immaterial
cost of sales and underlying administrative expenses totalling
GBP0.5m as non-recurring costs to aid comparison with the current
year
(3) Underlying earnings is calculated by dividing underlying
profit after tax by the weighted average number of shares in
issue
New project wins since our last announcement include;
-- Additional works at 22 Bishopsgate, London - Mechanical fit out over 51 Floors
-- 48,000 Sq Ft Office fit out for Cleary Gottlieb Steen & Hamilton LLP, London Wall Place
-- Garden Heart, new 3 story office development for the Covent
Garden Market Authority at New Covent Garden Market
-- The International Quarter, London, Stratford, Building S5 fit out floors 16-19
-- New Data Centre for Interxion, London - 3 new data halls
-- Royal National Orthopaedic Hospital, Stanmore, New Inpatient Ward
-- Redevelopment of St Joseph's College as part of the Dumfries Learning Town Project
-- Southbank Place, London, two commercial office blocks totalling 530,000 Sq Ft
Mark Lawrence, Chief Executive commented:
"We are delighted with the results that we are presenting today.
Our business is clearly making good progress.
Our focus on improving performance and margins throughout the
Group continues to show through. Equally pleasing is that we have
been awarded further contract wins which means that our forward
order book as at the end of February 2017 now stands at GBP350m, a
new record for TClarke.
In addition, to support our prefabrication capabilities we will
shortly be opening a brand new 26,000 Sq Ft facility at Stansted,
Essex. The move will provide enhanced facilities for our people,
while achieving improved quality and efficiency plus considerably
extended capabilities in our prefabrication and manufacturing
activities.
The outlook for the future remains positive."
-ends-
Date: 28(th) March 2017
For further information contact:
TClarke plc
Mark Lawrence Martin Walton
Chief Executive Officer Finance Director
Tel: 020 7997 7400
www.tclarke.co.uk
N+1 Singer (Financial Adviser RMS Partners
and Broker)
Sandy Fraser Simon Courtenay
Rachel Newton Tel: 020 3735 6551
Tel: 020 7496 3000
www.nplus1singer.com
Chairman's statement
2016 has been a year of strong performance across the Group.
The strategic initiatives and programmes implemented over the
recent years of difficult market conditions are now delivering
value and encouragingly these results are ahead of market
expectations.
The business is emerging as an effective and cohesive nationwide
team, strongly placed to focus on, and meet, client needs and to
address the growing opportunities and continuing challenges of our
market place.
The growth of our current and forward order book, combined with
the quality of the significant and high visibility current and
future projects, demonstrates the justified confidence of our
clients and the market in general, in our performance, strength,
strategic positioning, quality and ability to deliver.
Headline numbers ahead of market expectation
I am pleased to report that turnover increased by 15% in 2016 to
GBP278.6m, with growth in all geographic regions and a significant
number of large project wins for the Group.
More importantly, underlying profit before tax increased by 48%
to GBP6.2m. Furthermore, the underlying operating margin showed an
18% year on year increase to 2.5% in 2016 and underlying EPS
increased by 42% to 11.60p (2015: 8.16p). These are very pleasing
and creditable achievements given the current market conditions,
and are a testament to the leadership of our executive and delivery
teams across the Group - both on our construction sites and in our
offices.
Over previous years, we have steadily reported on a programme of
strategic changes and initiatives, organically funded and
internally designed and implemented, to reshape and refocus the
business so that we are better aligned to focus on creating,
delivering and growing value. These changes, initiatives and
investments are now beginning to deliver financial returns, as
demonstrated by our improved margins, which other industry peers
are aspiring to.
Growth matched by cost discipline and cash management
At the same time as winning and delivering the right kind of
projects and growing our turnover, forward order book and activity
levels, we have also concentrated on cost discipline and cash
management. Mindful of the competitive nature of our markets, our
2016 results and performance have benefited from our strong
disciplines in the internal management and delivery of projects,
which resulted in effective cost and cash management.
Net underlying overhead for 2016 decreased to 9.2% of revenue,
compared with 9.5% in 2015 and 10.1% in 2014. The net cash balance
was up 39% at GBP9.3m at the end of 2016, compared with GBP6.7m in
2015 and GBP5.3m in 2014. Encouragingly there has been considerable
year on year improvement in our average cash balances throughout
the year. During 2016 we were able to renew and increase our long
term banking facilities from GBP13m to GBP15m, provided at reduced
cost to the business.
My fellow Non-Executive Directors and I have undertaken a
programme of regular visits throughout the year to our offices and
project sites across all our regions, meeting and listening to our
people and teams. These visits play an essential role for us to
better understand the business and appreciate the complex nature of
the work our people undertake and succeed at, and enable us to see,
in practice, the ideas and initiatives which are being designed and
delivered in the field. We have seen at first hand the strength of
our project management teams across the country, which is something
that we, as Non-Executive and Executive Directors recognise and
appreciate and value highly
Dividend
The Board is pleased to propose a final dividend for the year
ended 31st December 2016 of 2.7p pence per share, reflecting the
Group's performance and our confidence in the business going
forward, whilst balancing the rewards to shareholders with the
interests of other stakeholders.
The Board remains committed to improving returns to shareholders
and delivering a sustainable increase in dividend over the longer
term is an important objective.
One disappointment
I am very disappointed we had to report the discovery during the
year of a significant fraud at one of our subsidiary companies. The
management response on discovery of the fraud was swift, decisive
and appropriate. An independent and comprehensive review of our
internal controls and procedures was commissioned immediately. As a
result of the review, a number of recommendations were made which
will further strengthen our controls and are in the process of
being implemented. The Board is satisfied that the fraud was
limited to the subsidiary company in question and that the full
extent of the fraud has been identified. Legal proceedings are
ongoing.
Outlook
2016 was an exceptionally good year, both in terms of underlying
trading performance and our cash position at year end, driven by
the timing of major project completions and stage payments received
in the second half of the year. Our order book for the year has
been replenished, with the performance of London being particularly
strong. We have increased the focus on certain regions in order to
bring them in line with internal targets yet, overall, our order
book is at a record high.
Whilst we are focused on delivering sustained margin improvement
over the long term, at this early stage of the current year we
cannot ignore inflationary pressures which may hold back further
margin improvement in 2017. Nevertheless, the Board is confident
that the Group is well placed to meet market expectations for the
year ahead.
Iain McCusker
Chairman
28th March 2017
Chief Executive Officer's Review
Our people have put in an excellent performance in 2016.
The big story behind the record turnover is the quality of the
jobs delivered and the order book that has been replenished so
strongly this year.
We have seen a series of major projects be awarded to the Group
across all our regions, signalling our valuable reputation, our
capabilities and our ability to deliver.
TClarke is positioned for further confident and controlled
growth with a clear and shared sense of value and how to create
it.
Our business infrastructure is solid
The Group is shaped correctly and resourced nationwide for an
agile response to market opportunities. Our people are clear about
our strategies and their roles in achieving them. We have set
parameters for evaluating opportunities and targeting those that
suit our skills and our growth journey. There is always more to do,
but when you add this to TClarke's exceptional culture of delivery
and operational control, together with the strong sense of values,
tradition and pride that is ingrained within 'The TClarke Way', we
have a strong base to build on going forward.
Major projects won and delivered in our core London M&E
business
It has been a particularly strong year for our London business.
Our vision to grow from a famous electrical contractor into a true
M&E contractor, known equally for both, has been realised.
Delivery of major mechanical and M&E projects and the win of
two towers at the enormous Southbank Tower project showed that we
are a major player in the M&E market. This transforms the scale
of our potential markets going forward - effectively more than
doubling them. Our success in securing the even larger 22
Bishopsgate project will be equally transformative, providing us
with a platform to lead in integrated building services, with major
technology advances that have potentially vast market
applications.
Major projects won and delivered across our regions
Success in London has been matched across our regions. Our
vision for our nationwide offices has been to make a decisive shift
from siloed local teams, delivering high quality small scale
projects, to a series of regional operations targeting large scale,
higher value projects, collaborating to maximise the value of their
resources and building the TClarke brand. In 2016, TClarke's
regional teams won a very wide range of large scale projects; more
than at any time in our history. We have built new strategic
partnerships, expanded existing relationships, entered new sectors,
expanded into new areas and combined our operations in new
ways.
Innovation and investment in the career paths of our people
We launched the TClarke Academy in 2016, as a comprehensive
internal training operation aimed at providing a clear route to the
top of the organization, giving everyone, whether they be in an
engineering, technical or support discipline, career advancement
opportunities. At TClarke it is expected for an apprentice to aim
for the top. I was an apprentice here and so were most of my senior
executive team, so our Training Academy is something that we, as
leaders, believe in and are personally committed to driving - and
indeed we deliver modules ourselves. In a year when we again took
on a far larger number of apprentices than the industry average,
the Group retained a far higher percentage of staff than the
industry average and built our resource of directly employed people
with quality people - the Academy is a further mark of our intent
to keep offering the best M&E resource in the UK.
Safety remains our paramount concern
We take enormous pride in every site safety award won by our
people and, in 2016, we won more than ever before. The total number
of those awards is not significant but the culture that earned them
is. I am personally proud of the work our safety establishment
carries out to further embed that culture and to keep driving
standards forward. We can never rest or become complacent regarding
health and safety - we need to keep investing in this area as
safety is paramount to our business.
Mark Lawrence
Chief Executive Officer
28th March 2017
Financial review
2015
Summary of financial performances 2016 (Re-presented)(3)
Continuing operations GBPm GBPm
Revenue 278.6 242.4
------------------------------------------- -------- -------------------
Operating profit:
- Underlying(1) 6.9 5.1
- Reported 4.4 4.4
------------------------------------------- -------- -------------------
Profit / (loss) before tax:
- Underlying(1) 6.2 4.2
- Reported 3.7 3.5
------------------------------------------- -------- -------------------
Profit / (loss) after tax:
- Underlying(2) 4.9 3.4
- Reported 2.9 2.8
------------------------------------------- -------- -------------------
Discontinued operations (0.5) (2.7)
------------------------------------------- -------- -------------------
Profit / (loss) for the year 2.4 0.1
------------------------------------------- -------- -------------------
Profit / (loss) before tax:
- Underlying(2) 11.60p 8.16p
- Continuing operations 6.74p 6.66p
- Reported 5.45p 0.13p
------------------------------------------- -------- -------------------
Dividend per share 3.2p 3.1p
------------------------------------------- -------- -------------------
(1) Underlying operating profit and profit
before tax are stated before amortisation
of intangible assets and non-recurring items
- see Note 4 to the financial information
(2) Underlying profit after tax and earnings
per share are stated after adjusting for
the tax effect of amortisation and non-recurring
items.
(3) Prior year re-presented to reclassify
certain immaterial cost of sales and underlying
administrative expenses totalling GBP0.5m
as non-recurring costs to aid comparison
with the current year.
Accounting policies and segmental reporting
The Group's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. There have been no significant
changes to accounting policies during the year ended 31st December
2016.
Underlying Group performance
Overview
Revenue from continuing operations increased by 14.9% to
GBP278.6m (2015: GBP242.4m), and underlying operating profit
increased by GBP1.8m to GBP6.9m (2015: GBP5.1m). Underlying
operating profit, which excludes amortisation and non-recurring
items, is the measure used to assess performance against targets
and determine performance related remuneration. All regions
delivered increased revenue, whilst London & South East and
Scotland showed significant increases in margins. Net underlying
overheads as a percentage of revenue fell to 9.2%. Our order book
grew by 10% to GBP330m (2015: GBP300m).
London & South East
Revenue from our London & South East operations increased by
10.7% to GBP142.9m (2015: GBP129.1m), generating an underlying
profit of GBP3.5m (2015: GBP2.0m). Underlying operating margin
increased to 2.4% (2015: 1.5%). We have secured a number of
significant new orders across a wide spectrum of work for 2017 and
beyond, including mechanical and IT as well as electrical services,
with our clients continuing to value our teams of in-house
engineers and tradesmen.
Central & South West
Revenue from our Central & South West operations increased
by 19.3% to GBP67.9m (2015: GBP56.9m) and underlying operating
profit improved to GBP1.0m (2015: GBP0.9m), with underlying
operating margins down slightly at 1.5% (2015: 1.6%). The region
continues to benefit from strong client relationships and repeat
business. The expansion of our healthcare business and our
burgeoning reputation in the South West have presented a number of
growth opportunities which should lead to improved profitability
going forward.
North
In the North revenue increased by 28.2% to GBP53.6m (2015:
GBP41.8m), with the region continuing to benefit from strong client
relationships and repeat business. Underlying operating profit was
GBP1.8m (2015: GBP1.9m). The underlying operating margin was 3.4%
(2015: 4.5%), as we invested in our core mechanical and electrical
contracting capabilities in the North West and the improved
coordination and consistency of our offering across the region
under a common managing director.
Scotland
Scotland's revenue increased by 29.6% to GBP21.0m (2015:
GBP16.2m), and underlying operating profit was GBP0.6m (2015:
GBP0.3m), representing an underlying operating margin of 2.9%
(2015: 1.9%). Scotland's strong performance continued its recovery
evident in the second half of 2015. As well as its continuing
strength in the residential market, Scotland has generated
significant IT, mechanical and electrical work streams in the
commercial sector.
Exceptional and non-underlying items
Exceptional and non-underlying items comprise GBP0.2m (2015:
GBP0.2m) amortisation of intangible assets, and GBP2.3m (2015:
GBP0.5m) non-recurring costs relating to the misappropriation of
funds uncovered towards the end of 2016. The total cost of the
fraud, including investigation costs, is GBP3.3m, GBP1.0m of which
had already been expensed in prior years. Results prior to and
including 2015 have not been restated as the impact cumulatively
and in each year was not material, however, the 2015 income
statement has been re-presented to include GBP0.5m costs relating
to the fraud as a non-recurring item in order to aid comparison
with the current year. The cost in 2016 includes GBP0.4m fees
incurred in investigating the fraud and pursuing civil and criminal
remedies.
Finance costs
Net finance costs were GBP0.7m (2015: GBP0.9m), including a
GBP0.6m (2015: GBP0.6m) non-cash finance charge in respect of the
pension scheme. Net interest on bank loans and overdrafts fell to
GBP0.2m (2015: GBP0.3m), reflecting improved cash performance
throughout the year.
Taxation
As a wholly UK based group, our tax charge is dependent on UK
corporation tax rates. For 2016, the tax charge was impacted by the
fall in prospective tax rates on deferred tax assets and
non-deductible expenses, which saw the effective tax rate increase
to 23.5% (2015: 20.1%).
Discontinued operations
Following the decision to discontinue our Bristol and Cardiff
operations in 2015, the Group has incurred further losses of
GBP0.5m after tax (2015: GBP2.7m) closing out its contractual
commitments in respect of these offices.
Earnings per share
Basic earnings per share after discontinued operations increased
to 5.45p (2015: 0.13p), with basic earnings per share from
continuing operations increasing to 6.74p (2015: 6.66p).
Basic underlying earnings per share after adjusting for
amortisation of intangible assets and non recurring costs and the
tax effect of these items, was 11.60p (2015: 8.16p).
Dividends
The Board is proposing a final dividend of 2.70p (2015: 2.60p),
with the total dividend for the year increasing by 3.2% to 3.20p
(2015: 3.10p). The dividend is covered 3.6 times by underlying
earnings.
The final dividend will be paid, subject to shareholder
approval, on 12th May 2017 to those shareholders on the register at
18th April 2017. The dividend will go ex-dividend on 13th April
2017. A dividend reinvestment plan (DRIP) is available to
shareholders.
Pension obligations
The triennial valuation of the pension scheme at 31st December
2015 showed a deficit of GBP14.9m, representing a funding level of
67% (2012 valuation: deficit GBP11.5m, funding level 68%).
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 provisional
agreement of the draft 2015 valuation, the Group has proposed a
revised deficit reduction plan which includes making additional
contributions and continuing to provide security to the pension
scheme in the form of a charge over property assets up to a
combined market value of GBP3.1m. From 1st January 2017 the future
service contribution will increase to 21.4% of pensionable payroll
(including employee contributions) and the deficit reduction
contribution has been set at GBP1.0m for the year ending 31st
December 2017, GBP1.25m for the year ending 31st December 2018 and
GBP1.5m per annum thereafter.
The Group has proposed an increase in employee contributions
from 8% to 10% of pensionable salary and is consulting with
employees on this proposal. The scheme is closed to new members and
the Group continues to meet its ongoing obligations to the
scheme.
In accordance with IAS 19 'Employee Benefits', an actuarial
expense of GBP6.3m, net of tax, has been recognised in reserves,
with the pension scheme deficit increasing by GBP7.2m to GBP20.6m
(2015: GBP13.4m). The increase in the deficit is primarily due to a
fall in the discount rate applied to scheme liabilities, which
arose due to the significant fall in bond yields during 2016,
offset by changes in mortality assumptions.
Cash flow and funding
The Group's net cash balances improved to GBP9.3m at 31(st)
December 2016 (2015: GBP6.7m) after deducting the GBP3.0m (2015:
GBP5.0m) outstanding under the revolving credit facility. This
reflects the improved underlying performance of the Group and
improved management of working capital.
During the year the Group renegotiated its banking facilities
and now has in place a GBP10.0m revolving credit facility, which is
committed until 31st March 2020 and a GBP5.0m overdraft facility,
renewable annually. Interest on overdrawn balances is charged at
2.25% above base rate, and interest on balances drawn down under
the revolving credit facility is charged at 2.25% above LIBOR,
fixed for the duration of each drawdown (typically three to six
months). The Group was compliant with the terms of the facilities
throughout the year ended 31st December 2016 and the Board's
detailed projections demonstrate that the Group will continue to
meet its obligations in the future. The Group also has in place
GBP20m of bonding facilities, of which GBP11.1m were unused at 31st
December 2016.
Net assets and capital structure
The Group is funded by equity capital, retained reserves and
bank loans, and there are no plans to change this structure. In
spite of the strong underlying performance, shareholders' equity
decreased by GBP5.5m during the year to GBP14.1m (2015: GBP19.6m)
due to the increase in the pension deficit (reported through other
comprehensive income) and the misappropriation of funds referred to
above.
At GBP22.8m (2015: GBP23.0m), goodwill and intangible assets
arising on previous acquisitions represent a significant proportion
of the Group's total assets of GBP112.1m (2015: GBP109.4m). The
Board has undertaken a rigorous impairment review in respect of the
intangible assets at 31st December 2016 and concluded that no
impairment is necessary.
Group reorganisation
During the year the Group implemented the first phase of a group
reorganisation, which saw all the Group's operating activities in
London & the South East and Central & South West divisions
come together into a single statutory entity, TClarke Contracting
Limited, with a separate statutory entity, TClarke Services Limited
providing engineering and support services to the enlarged
operating company. TClarke Services Limited also became the
principal employer of the Group's defined benefit pension scheme
and in accordance with the Group's accounting policies the defined
benefit pension obligation was transferred to that company. Phase 2
of the Group reorganisation, which will see our operations in the
North and Scotland merged into TClarke Contracting Limited, will be
implemented during 2017. This reorganisation represents the
culmination of a process of rationalisation and increased
consistency of organisation and delivery that has been ongoing for
a number of years.
Financial risk management
The Group's main financial assets are contract and other trade
receivables and 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.
Martin Walton
Finance Director
28th March 2017
Consolidated income statement
for the year ended 31(st) December 2016
2016 2016 2016 2015* 2015* 2015*
Non-underlying Non-underlying
Underlying items Underlying items
items GBPm Total items GBPm Total
GBPm GBPm GBPm GBPm
Continuing operations:
Revenue 278.6 - 278.6 242.4 - 242.4
Cost of sales (246.2) - (246.2) (214.4) - (214.4)
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Gross profit 32.4 - 32.4 28.0 - 28.0
Other operating 0.2 - 0.2 0.1 - 0.1
income
Administrative
expenses :
------------- --------------- ---------- ------------- --------------- ----------
Amortisation of
intangible assets - (0.2) (0.2) - (0.2) (0.2)
Non-recurring
costs - (2.3) (2.3) - (0.5) (0.5)
Other administrative
expenses (25.7) - (25.7) (23.0) - (23.0)
------------- --------------- ---------- ------------- --------------- ----------
Total administrative
expenses (25.7) (2.5) (28.2) (23.0) (0.7) (23.7)
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Profit / (loss)
from operations 6.9 (2.5) 4.4 5.1 (0.7) 4.4
Finance income - - - 0.1 - 0.1
Finance costs (0.7) - (0.7) (1.0) - (1.0)
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Profit / (loss) 6.2 (2.5) 3.7 4.2 (0.7) 3.5
before taxation
Taxation (1.3) 0.5 (0.8) (0.8) 0.1 (0.7)
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Profit / (loss)
from continuing
operations 4.9 (2.0) 2.9 3.4 (0.6) 2.8
(Loss) from discontinued
operations - (0.5) (0.5) - (2.7) (2.7)
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Profit / (loss)
for the year 4.9 (2.5) 2.4 3.4 (3.3) 0.1
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Earnings / (loss)
per share for profit
/ (loss) from continuing
operations
Attributable to 11.60p (4.86)p 6.74p 8.16p (1.50)p 6.66p
owners of TClarke 11.20p (4.70)p 6.50p 7.88p (1.44)p 6.44p
plc:
Basic
Diluted
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
Earnings / (loss)
per share
Attributable to 11.60p (6.15)p 5.45p 8.16p (8.03)p 0.13p
owners of TClarke 11.20p (5.95)p 5.25p 7.88p (7.76)p 0.12p
plc:
Basic
Diluted
---------------------------- ------------- --------------- ---------- ------------- --------------- ----------
* Re-presented to classify certain immaterial cost of sales and
underlying administrative expenses totalling GBP0.5m as
non-recurring administrative expenses. Further details are given in
note 4.
Consolidated statement of comprehensive income
for the year ended 31(st) December 2016
---------------------------------------------------- ------
2016 2015
GBPm GBPm
------------------------------------------ -------- ------
Profit for the year 2.4 0.1
------------------------------------------ -------- ------
Other comprehensive (expense) /
income:
Items that will not be reclassified
to profit or loss
Actuarial gain / (loss) on defined
benefit pension scheme (6.3) 2.2
Other comprehensive (expense) /
income for the year, net of tax (6.3) 2.2
Total comprehensive (expense) /
income for the year (3.9) 2.3
------------------------------------------ -------- ------
Consolidated statement of financial position
as at 31(st) December 2016
2016 2015
GBPm GBPm
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Non current assets
Intangible assets 22.8 23.0
Property, plant and equipment 3.9 4.6
Deferred tax assets 3.3 2.3
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
30.0 29.9
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Current assets
Inventories 0.6 0.4
Amounts due from customers under 27.8 31.1
construction contracts
Trade and other receivables 41.8 36.3
Cash and cash equivalents 12.3 11.7
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
82.5 79.5
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Total assets 112.5 109.4
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Current liabilities
Amounts due to customers under construction (4.4) (4.1)
contracts
Trade and other payables (70.1) (67.1)
Current tax liabilities (0.2) -
Obligations under finance leases (0.1) (0.1)
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
(74.8) (71.3)
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Net current assets 7.7 8.2
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Non current liabilities
Bank loans (3.0) (5.0)
Other payables - (0.1)
Retirement benefit obligation (20.6) (13.4)
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
(23.6) (21.6)
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Total liabilities (98.4) (89.8)
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Net assets 14.1 19.6
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Equity attributable to owners of
the parent
Share capital 4.2 4.1
Share premium 3.1 3.1
ESOT share reserve (0.8) (0.4)
Revaluation reserve 0.5 0.6
Retained earnings 7.1 12.1
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Total equity 14.1 19.6
----------------------------------------------- --------------------------------------------------- ---------------------------------------------------
Consolidated statement of cash flows
for the year ended 31(st) December 2016
2016 2015
GBPm GBPm
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Net cash generated from operating
activities 4.0 2.7
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Investing activities
Interest received - 0.2
Purchase of property, plant and (0.2) (0.5)
equipment
Receipts on disposal of property, 0.5 0.5
plant and equipment
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Net cash generated from investing
activities 0.3 0.2
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Financing activities
Repayment of bank borrowing (2.0) -
Equity dividends paid (1.3) (1.3)
Acquisition of share by ESOT (1.5) (0.7)
Disposal of shares by ESOT 1.1 0.5
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Net cash used in financing activities (3.7) (1.5)
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Net increase in cash and cash equivalents 0.6 1.4
Cash and cash equivalents at beginning 11.7 10.3
of year
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Cash and cash equivalents at end
of year 12.3 11.7
-------------------------------------------- ---------------------------------------------------- ----------------------------------------------------
Consolidated statement of changes in equity
for the year ended 31(st) December 2016
Share Share ESOT Revaluation Retained
capital premium share reserve earnings Total
GBPm GBPm reserve GBPm GBPm GBPm
GBPm
---------------------------- --------- --------- --------- ------------ ---------- --------
At 1(st) January 2015 4.1 3.1 (0.1) 0.8 11.0 18.9
---------------------------- --------- --------- --------- ------------ ---------- --------
Comprehensive income:
Profit for the year - - - - 0.1 0.1
Other comprehensive
income:
Actuarial gain on - - - - 2.9 2.9
retirement benefit
obligation
Deferred income tax
charge on actuarial
gain on
retirement benefit - - - - (0.6) (0.6)
obligation
Effect of change in - - - - (0.1) (0.1)
tax rate
---------------------------- --------- --------- --------- ------------ ---------- --------
Total other comprehensive
income - - - - 2.2 2.2
---------------------------- --------- --------- --------- ------------ ---------- --------
Total comprehensive
income - - - - 2.3 2.3
---------------------------- --------- --------- --------- ------------ ---------- --------
Transactions with owners
Share based payment - - (0.7) - (0.1) (0.1)
debit
Shares acquired by - - 0.5 - - (0.7)
ESOT
Shares distributed 0.1 - (0.1) - - 0.5
by ESOT
Shares issued to ESOT - -
Dividends paid (1.3) (1.3)
---------------------------- --------- --------- --------- ------------ ---------- --------
Total transactions
with owners 0.1 - (0.3) - (1.4) (1.6)
---------------------------- --------- --------- --------- ------------ ---------- --------
Transfers - - - (0.2) 0.2 -
---------------------------- --------- --------- --------- ------------ ---------- --------
At 31(st) December
2015 4.2 3.1 (0.4) 0.6 12.1 19.6
---------------------------- --------- --------- --------- ------------ ---------- --------
Comprehensive income:
Profit for the year - - - - 2.4 2.4
Other comprehensive
income:
Actuarial loss on - - - - (7.3) (7.3)
retirement benefit
obligation
Deferred income tax
credit on actuarial
loss
on retirement benefit - - - - 1.4 1.4
obligation
Effect of change in - - - - (0.4) (0.4)
tax rate
---------------------------- --------- --------- --------- ------------ ---------- --------
Total other comprehensive
expense - - - - (6.3) (6.3)
---------------------------- --------- --------- --------- ------------ ---------- --------
Total comprehensive
expense - - - - (3.9) (3.9)
---------------------------- --------- --------- --------- ------------ ---------- --------
Transactions with owners
Share based payment - - - - 0.1 0.1
credit
Shares acquired by - - (0.9) - - (0.9)
ESOT
Shares distributed - - 0.5 - - 0.5
by ESOT
Dividends paid - - - - (1.3) (1.3)
---------------------------- --------- --------- --------- ------------ ---------- --------
Total transactions
with owners - - (0.4) - (1.2) (1.6)
---------------------------- --------- --------- --------- ------------ ---------- --------
Transfers - - - (0.1) 0.1 -
---------------------------- --------- --------- --------- ------------ ---------- --------
At 31(st) December
2016 4.2 3.1 (0.8) 0.5 7.1 14.1
---------------------------- --------- --------- --------- ------------ ---------- --------
Notes to the preliminary financial statements
Note 1 - Basis of preparation
TClarke plc (the 'Company') is a company listed on the London
Stock Exchange and domiciled 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
('IFRSs') as adopted by the European Union, IFRS IC Interpretations
and the Companies Act 2006 applicable to companies reporting under
IFRS and have been prepared on a going concern basis under the
historic cost convention as modified by the revaluation of land and
buildings.
The financial information does not constitute the Company's
statutory accounts for the year ended 31(st) December 2016 or 2015
but is derived from the audited financial statements for the year
ended 31(st) December 2016. Statutory accounts for the year ended
31(st) December 2015 have been delivered to the Registrar of
Companies. Statutory accounts for the year ended 31(st) December
2016 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 unqualified and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006 in respect
of the accounts for the year ended 31(st) December 2015 or for the
year ended 31(st) December 2016.
The following standards, interpretations and amended standards
have been applied for the first time for the financial year
beginning 1st January 2016.
Annual Improvements 2012-2014 Cycle: Amendments to various
standards and interpretations under the Annual Improvements
2012-2014 Cycle are applicable for the first time for the year
ending 31st December 2016, but none of these amendments has had a
significant effect on the financial statements.
Note 2 - Significant judgements and sources of estimation
uncertainty
In the application of the Group's accounting policies the
directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities at
the reporting date and the amounts of revenue and expenses incurred
during the period that may not be readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
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.
The estimates and assumptions that have the most significant
impact are set out below.
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. 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.
Non-underlying items
Non-underlying items are items of financial performance which
the Group believes should be separately identified on the face of
the income statement to assist in understanding the underlying
financial performance achieved by the Group. The quantification,
disclosure and presentation in the financial statements of
non-underlying items requires judgement.
Discontinued operations
The judgement as to whether an activity that has ceased
constitutes a discontinued operation requires an assessment of
whether it forms a separate component of the Group's business and
represents a separate major line of business or geographical area
of operations that has been disposed of, has been abandoned or that
meets criteria to be classified as held for sale.
Impairment of goodwill
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.
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 9, 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 - Segmental information
The Group provides electrical and mechanical contracting and
related services to the construction industry and end users.
For management and internal reporting purposes the Group is
organised geographically into four regional divisions; London and
South East, Central and South West, North, and Scotland, reporting
to the Chief Executive Officer, who is the chief operating decision
maker.
The measurement basis used to assess the performance of the
divisions is underlying profit from operations, stated before
amortisation of intangible assets and non-recurring items. All
assets and liabilities of the Group have been allocated to segments
apart from the retirement benefit obligation and tax assets and
liabilities.
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.
Segment information about the Group's continuing operations is
presented below:
Year ended London Central Unallocated
31(st) December & South & South North Scotland & Elimination Total
2016 East West GBPm GBPm GBPm GBPm
GBPm GBPm
Total revenue 142.9 67.9 53.6 21.0 - 285.4
Inter segment
revenue - (1.1) (3.4) (2.3) - (6.8)
--------- --------- -------- ----------- --------------- --------
Revenue from
external
operations 142.9 66.8 50.2 18.7 - 278.6
--------- --------- -------- ----------- --------------- --------
Underlying profit
from
operations 3.5 1.0 1.8 0.6 - 6.9
Amortisation
of intangibles - - (0.2) - - (0.2)
Non-recurring
items (see Note
4) (2.3) - - - - (2.3)
--------- --------- -------- ----------- --------------- --------
Profit from
operations 1.2 1.0 1.6 0.6 - 4.4
Finance income - - 0.1 - (0.1) -
Finance costs (0.8) - - - 0.1 (0.7)
--------- --------- -------- ----------- --------------- --------
Profit before
tax 0.4 1.0 1.7 0.6 - 3.7
Taxation expense (0.8)
--------
Profit for the
year from
continuing operations 2.9
--------
Assets 57.8 43.9 22.5 10.0 (21.7) 112.5
Liabilities (53.4) (31.5) (13.1) (4.7) 4.3 (98.4)
--------- --------- -------- ----------- --------------- --------
Net assets 4.4 12.4 9.4 5.3 (17.4) 14.1
--------- --------- -------- ----------- --------------- --------
Year ended London Central Unallocated
31(st) December & South & South North Scotland & Elimination Total
2015 East West GBPm GBPm GBPm GBPm
GBPm GBPm
Total revenue 129.1 56.9 41.8 16.2 - 244.0
Inter segment
revenue - (0.7) - (0.9) - (1.6)
--------- --------- -------- ----------- --------------- --------
Revenue from
external
operations 129.1 56.2 41.8 15.3 - 242.4
--------- --------- -------- ----------- --------------- --------
Underlying profit
from
operations 2.0 0.9 1.9 0.3 - 5.1
Amortisation
of intangibles - - (0.2) - - (0.2)
Non-recurring
items (see Note
4) (0.5) - - - - (0.5)
--------- --------- -------- ----------- --------------- --------
Profit from
operations 1.5 0.9 1.7 0.3 - 4.4
Finance income 0.1 - 0.1 - (0.1) 0.1
Finance costs (1.0) - - (0.1) 0.1 (1.0)
--------- --------- -------- ----------- --------------- --------
Profit before
tax 0.6 0.9 1.8 0.2 - 3.5
Taxation expense (0.7)
--------
Profit for the
year from
continuing operations 2.8
--------
Assets 55.2 28.6 24.2 9.2 (7.8) 109.4
Liabilities (48.5) (16.2) (13.9) (4.7) (6.5) (89.8)
--------- --------- -------- ----------- --------------- --------
Net assets 6.7 12.4 10.3 4.5 (11.4) 19.6
--------- --------- -------- ----------- --------------- --------
Note 4 - Non-recurring costs
During the year ended 31st December 2016 the Group uncovered
financial irregularities within the accounting function of a wholly
owned subsidiary, DG Robson Mechanical Services Limited ('DGR').
GBP2.9m of cash was misappropriated over a number of years, of
which GBP1.9m has been expensed in 2016 and GBP1.0m had been
charged to the income statement in previous years within cost of
sales and administrative expenses. The 2016 expense has been
separately disclosed as a non-recurring item. Results prior to and
including 2015 have not been restated as the impact cumulatively
and in each year was not considered to be material, however, the
2015 results have been re-presented to show funds misappropriated
in that year as non-recurring, in order to aid the comparison of
underlying performance.
The Group engaged expert professional advisers to assist in the
investigation and recovery of the stolen funds. The cost of the
investigation to 31(st) December 2016 is GBP0.4m.
Note 5 - Taxation
2016 2015
GBPm GBPm
Current tax expense
UK corporation tax payable on profits
for the year 0.8 0.8
0.8 0.8
------ --------
Deferred tax expense
Arising on:
Origination and reversal of temporary
differences - (0.1)
- (0.1)
------ --------
Total income tax expense 0.8 0.7
------ --------
Reconciliation of tax charge
Profit for the year 3.7 3.5
------ --------
Tax at standard UK tax rate of 20.00%
(2015: 20.25%) 0.7 0.7
Permanently disallowable items 0.1 -
Taxation expense 0.8 0.7
------ --------
Note 6 - Discontinued operations
2016 2015
GBPm GBPm
Revenue 4.5 5.0
Cost of sales (5.1) (6.8)
------ ------
Gross loss (0.6) (1.8)
Administrative expenses - (1.6)
------ ------
Loss from operations and before
taxation (0.6) (3.4)
Taxation 0.1 0.7
------ ------
Loss for the financial year (0.5) (2.7)
------ ------
Net cash outflow from discontinued
operations (0.6) (3.5)
------ ------
On 19 November 2015 the Group announced its intention to
discontinue its operations in the Cardiff and Bristol areas. The
Group's activities in these areas ceased and the closure of the
Cardiff and Bristol offices was successfully completed by 31st
December 2015, with the remaining employees and any outstanding
contractual commitments transferring to our expanded TClarke South
West operation. The Group incurred further losses closing out these
contractual commitments during 2016, and as at 31(st) December 2016
these have been completed.
Note 7 - Earnings / (loss) per share
A. Basic earnings / (loss) per share
Basic (loss) / 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.
2016 2015
Earnings / (loss): GBPm GBPm
Profit / (loss) attributable to owners
of the Company:
Continuing operations 2.9 2.8
Discontinued operations (0.5) (2.7)
------ ------
2.4 0.1
------ ------
Weighted average number of ordinary
shares (000s) 41,613 41,670
------- -------
B. Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The Company
has three categories of dilutive potential ordinary shares: share
options granted under the Savings Related Share Option Scheme and
conditional share awards and options granted under the Equity
Incentive Plan.
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.
2016 2015
Earnings / (loss): GBPm GBPm
Profit / (loss) attributable to owners
of the Company:
Continuing operations 2.9 2.8
Discontinued operations (0.5) (2.7)
------- -------
2.4 0.1
------- -------
Weighted average number of ordinary
shares (000s) 41,613 41,670
Adjustments:
Savings Related Share Option Schemes
(000s) 170 465
Equity Incentive Plan
* Conditional share awards (000s) 854 957
* Options (000s) 447 72
-------
Weighted average number of ordinary
shares for diluted earnings per share
(000s) 43,084 43,164
------- -------
C. Underlying earnings per share
Underlying earnings per share represents profit for the year
from continuing operations adjusted for amortisation of intangible
assets and non-recurring 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.
Underlying earnings per share 2015
2016 (re-presented)
GBPm GBPm
Profit from continuing operations
attributable to owners of the Company 2.9 2.8
Adjustments:
Amortisation of intangible assets 0.2 0.2
Non-recurring costs (see Note 4) 2.3 0.5
Tax effect of adjustments (0.5) (0.1)
------- ----------------
Underlying profit from continuing
operations 4.9 3.4
------- ----------------
Weighted average number of ordinary
shares (000s) 41,613 41,670
Adjustments:
Savings Related Share Option Schemes
(000s) 170 465
Equity Incentive Plan
* Conditional share awards (000s) 854 957
* Options (000s) 447 72
Weighted average number of ordinary
shares for diluted earnings per share
(000s) 43,084 43,164
------- ----------------
Note 8 - Dividends
2016 2015
GBPm GBPm
Final dividend of 2.60p (2015: 2.60p)
per ordinary share proposed and
paid during the year relating to
the previous year's results 1.1 1.1
Interim dividend of 0.50p (2015:
0.50 p) per ordinary share paid
during the year 0.2 0.2
------ ------
1.3 1.3
------ ------
The directors are proposing a final dividend of 2.70 p (2015:
2.60 p) per ordinary share totalling GBP1.1m (2015: GBP1.1m).
Subject to approval at the annual general meeting, the final
dividend will be paid on 12(th) May 2017 to shareholders on the
register as at 18(th) April 2017. The shares will go ex-dividend on
13(th) April 2017. 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 2016 final payment, may do so by contacting Capita Asset
Services on 0871 664 0300 (Lines are open 8:30am - 5:30pm Mon-Fri.
Calls cost 10p a minute plus network charges). The last day for
election for the final dividend reinvestment is 18(th) April 2017
and any requests should be made in good time ahead of that
date.
Note 9 - 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:
2016 2015
GBPm GBPm
Present value of defined benefit
obligations 53.3 43.2
Fair values of scheme assets (32.7) (29.8)
------- -------
Deficit in scheme 20.6 13.4
------- -------
Key assumptions used:
Rate of increase in salaries 2.60% 2.85%
Rate of increase of pensions in
payment 3.05% 3.05%
Discount rate 2.80% 4.05%
Inflation assumption 3.30% 3.35%
Mortality assumptions (years): 2016 2015
Life expectancy at age 65 for current
pensioners:
Men 21.9 23.7
Women 23.1 25.0
Life expectancy at age 65 for future
pensioners (current age 45)
Men 24.2 25.0
Women 25.7 26.5
------- -------
Note 10 - Notes to the statement of cash flows
a. Reconciliation of operating profit
to net cash inflow from operating 2016 2015
activities GBPm GBPm
Profit / (loss) from operations:
Continuing operations 4.4 4.4
Discontinued operations (0.6) (3.4)
Depreciation charges 0.5 0.5
Profit on sale of property, plant
and equipment (0.1) (0.1)
Equity settled share based payment
expense / (credit) 0.1 (0.1)
Amortisation 0.2 0.2
Defined benefit pension scheme credit (0.7) (0.5)
------ ------
Operating cash flows before movements
in working capital 3.8 1.0
Increase in inventories (0.2) -
Decrease / (increase) in contract
balances 3.5 (3.1)
Increase in trade and other receivables (5.5) (1.6)
Increase in trade and other payables 3.1 7.1
------ ------
Cash generated by operations 4.7 3.4
Corporation tax paid (0.5) (0.3)
Interest paid (0.2) (0.4)
------ ------
Net cash generated by operating
activities 4.0 2.7
------ ------
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:
2016 2015
GBPm GBPm
Cash and cash equivalents 12.3 11.7
------ ------
Note 11 - Related party transactions
The remuneration of the directors of the Company was GBP1.8m
(2015: GBP1.7m), including pension contributions of GBP0.1m (2015:
GBP0.2m) and termination benefits of GBP0.1m (2015: GBPnil).
The remuneration of key management (including directors of
subsidiary companies) was GBP3.6m (2015: GBP3.6m), including
termination benefits of GBP0.1m (2015: GBP0.2m). Post-employment
benefits in respect of key management (including subsidiary
directors) were GBP0.4m (2015: GBP0.5m).
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 12 - Annual General Meeting
The 105(th) Annual General Meeting will be held at 200
Aldersgate, St Paul's, London EC1A 4HD on Friday 5(th) May 2017 at
10.00 am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMGZFLNMGNZM
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