TClarke plc

Half year results for the six months ended 30 June 2023

Forward order book at record level

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its half year results for the period ended 30 June 2023.

Earnings per share is calculated by dividing profit after tax by the weighted average number of shares in issue.

Trading

Trading has continued in line with expectations for the first six months of 2023 with revenue at a similar level compared with the corresponding period last year. Significant revenue growth is forecast for H2 2023; as a result the Board expects the Group to achieve its £500m annual revenue target. Revenue growth is particularly strong in London; this growth is forecast to continue throughout 2024 and 2025. Revenue is targeted to grow to £600m in 2024 and £650m in 2025.

Cash and Facilities

Good financial discipline is at the centre of our operations. Net cash is £4.5m as at 30 June 2023 (2022: £7.2m).The principal cash movements are detailed in the banking facilities section of this report.

In a separate announcement on 6 July 2023 the Board announced that it has conditionally raised gross proceeds of £10.7 million by way of an oversubscribed placing of new ordinary shares in the Company in order to fund significant further expansion beyond 2023.

The net proceeds of the Placing will further strengthen the Group's balance sheet and will provide additional resources with which to capture and deliver additional identified short to medium term attractive contract opportunities in the London business - in doing so driving further growth and margin expansion.

In addition the Group has banking facilities with Nat West comprising a £25m revolving credit facility (RCF) which extends to August 2026 and a £5m overdraft facility.

Dividend

The Board declares an interim dividend of 1.375p per share (2022: 1.250p per share) to be paid on 29 September 2023 to shareholders on the register at 1 September 2023.

Net Assets

Group net assets have increased by £3.1m in the six months to 30 June 2023 and now stand at £41.8m. This is principally due to the increase in retained earnings and the post tax reduction in pension deficit.

Order Book

Our confidence is underpinned with the success of the Group's forward order book which has been replenished and expanded and now stands at a new record of £781m. This is an £195m increase compared to the position at 30 June 2022. In addition, TClarke has many target projects and opportunities with the pipeline of current bids exceeding £1bn.The split of the order book is as follows:

Outlook

The Board expects to achieve the 3-year strategic target of growing from a £300m turnover business to a £500m turnover business.

The Board is encouraged by the strength of the Group's position in the market and is confident that revenue growth will continue throughout 2024 and 2025.

Date: 13 July 2023

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Operational Review

The Group has delivered another set of strong results for the first half of the year with revenue increasing by £0.8m to £207.0m from £206.2m in the same period last year. Operating profit has decreased slightly by £0.3m to £5.7m (30 June 2022: £6.0m), but operating margins are up to 2.8% when compared with 2.7% for 2022 as a whole.

We have continued to target organic growth based on the established engineering strengths of the business whilst targeting additional revenue streams. We have focused on maintaining our premier position in our five core market sectors whilst growing revenue from larger projects outside of London, expanding our healthcare offering, becoming a major player in the data centre market and investing in our capability to deliver smart building solutions.

We have seen sustained growth in our London market providing engineering solutions to some of the capital's most iconic buildings whilst also successfully pursuing our strategy of targeting large projects in the regional businesses. We currently have 13 live projects each in excess of £5m outside of London.

Our technology offering, specifically in UK Data Centres where TClarke is now delivering six Data Centres, has seen solid growth of £2.6m to £64.8m cementing this as our largest operational sector, with the expectation for further rapid growth in the second half of the year. There remain many opportunities for growth in this sector and we expect Data Centres to continue to contribute significant revenues in the medium term.

Whilst we strive to be a socially responsible business, specifically implementing initiatives to improve TClarke's own environmental impact, the move towards sustainable practices more generally has offered TClarke with unique opportunities to lead the industry in helping clients with large existing infrastructure improve their sustainability. In addition to our capability to deliver smart building solutions, we have seen an excellent response in the first half of 2023 to our new ground source heat pump engineering and technological solutions.

We remain focused on the major areas of public sector infrastructure. We continue to work in hospitals across the country delivering major upgrades to the healthcare infrastructure with an 'on site' portfolio of eight major hospital projects. This marks a milestone in TClarke Healthcare's steady rise from dispersed pockets of expertise and specialisation to a one-stop nationwide service that leads in critical new technologies and capabilities for the next generation of smart hospitals.

Our recent diversification of the Scotland business from a predominantly residential M&E provider to an increased commercial M&E offering has enabled TClarke to mitigate the challenging trading environment in the residential market which has been driven by the rise in interest rates and the reaction of housebuilders to slow production. The hotels market remains buoyant and we look forward to the second half of 2023 as we begin work on several prestigious hotel projects.

Pension Obligations

In accordance with IAS 19 'Employee Benefits', an actuarial gain of £0.6m, net of tax, has been recognised in reserves during the first six months of 2023, with the pension scheme deficit decreasing to £11.4m (30 June 2022: £15.9m). The decrease in the deficit is largely the result of the discount rate increasing to 5.14% (30 June 2022: 3.82%), partially offset by the hedging strategy employed by the scheme. In accordance with the Group's agreed deficit reduction plan, described in detail in the most recent annual report, the annual deficit reduction contribution is set at £1.2m per annum.

The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.

Banking Facilities and Cash Flow

The Group has recently renewed its banking facilities, which comprise a £5.0m overdraft facility, repayable on demand, and a £25.0m revolving credit facility ("RCF") expiring 31 August 2026. At 30 June 2023 the Group had drawn down £15.0m (2022: £15.0m) of the RCF and the overdraft facility was unutilised. The gross cash balance was £19.5m, resulting in net cash of £4.5m. The Group therefore has up to £34.5m available to support the Group's working capital flows and funding demands during the course of the year. The Group has £65.1m bonding facilities in place of which £30.1m were utilised at 30 June 2023.

See Note 9 (Post Balance Sheet Events) for details on the share placing discussed above.

The net cash figure of £4.5m is £3.0m lower than at the year end reflecting profit for the period, operational and other non operating cashflows, as set out below:

Net Assets and Capital Structure

The Group is funded by equity capital, retained reserves and bank facilities. Shareholders' equity at 30 June 2023 is £41.8m; an increase of £6.7m compared to 30 June 2022.

Notes to the condensed consolidated financial statements for the six months to 30 June 2023

Note 1 - Basis of preparation

TClarke plc (the 'Company') is a company incorporated and domiciled in the United Kingdom.  The nature of the Group's operations and its principal activities are set out in Note 2 below and in the interim management report.  The consolidated interim financial statements comprise the condensed financial statements of the Company and its subsidiaries (together the 'Group'). 

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  The statutory accounts for the year ended 31 December 2022 were approved by the Board of Directors on 20^th March 2023 and have been delivered to the Registrar of Companies and a copy has been made available on the Company's website at www.tclarke.co.uk. The auditors' report on those accounts was unqualified and did not contain any statement under section 498 of the Companies Act 2006.

These condensed interim financial statements for the half year ended 30 June 2023 have been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. They do not include all the information required for the full annual financial statements and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 December 2022.

The interim financial statements have not been audited or reviewed by the Company's auditors.

Accounting policies

Except as described below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31 December 2022.

Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings.

Estimates and financial risk management

The preparation of interim financial statements requires the Directors to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities at the reporting date and the amounts of revenue and expense incurred during the period that may not be readily apparent from other sources.  The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.  Actual results may differ from these estimates.

In preparing these interim financial statements, the significant judgements made by the Directors in applying the Group's accounting policies and the key sources of uncertainty together with the Group's financial risk management objectives and policies were the same as those that applied to the financial statements as at and for the year ended 31 December 2022. The principal risks and uncertainties continue to be those which are set out on pages 29-32 of the Group's annual report and accounts for the year ended 31 December 2022.

Going concern

As at 30 June 2023 the Group held cash of £19.5m (2022: £22.5m) and had drawn down short term borrowings of £15m under a revolving credit facility. This resulted in a net cash of £4.5m (2022: £7.5m). The Group also has access to a further £10.0m of the revolving credit facility and a £5.0m overdraft facility. The level of usage of the revolving credit facility is dependent on covenant compliance. No balances were drawn down under the overdraft facility at 30 June 2023.

After making appropriate enquiries, the Directors are satisfied that the Company and Group have adequate resources to continue their operations for the foreseeable future.  Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

See Note 9 (Post Balance Sheet Events) for details on the share placing discussed above.

Note 2 - Segmental information

The Group provides electrical and mechanical contracting and related services to the construction industry and end users.

At the beginning of the year the Group changed its internal management reporting, moving away from the previous geographic split of segments, and effectively adopting one operating segment. In delivering the Board's growth strategy, including focusing on winning large projects outside of London, the previous split ceased to be fully representative of the way the Group operates, with contracts often being won through entity-wide relationships or delivered outside of a segment's geographic footprint. As such, the Board, in its role as 'chief operating decision-maker', now only receives financial information for the Group as a whole, representing the Group's one operating segment. This approach has also been reflected in the preparation of these interim financial statements which as a result no longer require segmental analysis.

The Group's revenue from contracts with customers, analysed by business sector, was as follows:

Note 3 - Taxation expense

The effective corporation tax rate applied for the period is 23.5% (30 June 2022: 19.0%) being the pro-rated tax rate for the 2023 financial year.

Note 4 - Earnings per share

A.  Basic earnings per share

The earnings per share represent the profit for the period divided by the weighted average number of ordinary shares in issue. 

B.         Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.  The Company has one category of dilutive potential ordinary shares: share options granted under the Company's SAYE schemes. Further details of the scheme are given in note 18 of the 2022 annual report and financial statements.

Note 5 - Dividends

A final dividend of 4.1p (2022: 4.1p) per Ordinary share was paid during the year relating the previous year's results. The Directors are proposing an interim dividend of 1.375p (2022: 1.250p) per Ordinary share (post placing) totalling £0.7m (2022: £0.5m).

Note 6 - Notes to the consolidated statement of cash flows

B. Cash and cash equivalents

Cash and cash equivalents comprise cash at bank less bank overdrafts.

Note 7 - Related party transactions

Transactions between the Company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Full disclosure of the Group's other related party transactions is given in Note 21 to the Group's financial statements for the year ended 31 December 2022. There have been no material changes in these relationships in the six months ended 30 June 2023 that have materially affected the financial position or performance of the Group during that period.

Note 8 - Pension commitments

The present value of the defined benefit retirement benefit scheme and the related past and current service costs were measured using the projected unit credit method. The amount included in the statement of financial position arising from the Group's obligations in respect of its defined benefit retirement benefit scheme is as follows:

Note 9 - Post Balance Sheet Events

On 6 July 2023 the Group announced that it had conditionally raised gross proceeds of £10.7 million by way of an oversubscribed placing of new Ordinary Shares in the Company to certain institutional and other investors in order to fund significant further expansion beyond 2023. The placing is subject to TClarke shareholder approval at a general meeting to be held on 24 July 2023 at 9.00 a.m.

The Placing Shares will, when issued, be credited as fully paid and rank pari passu in all respects with each other and with the Existing Ordinary Shares, including, without limitation, the right to receive all dividends and other distributions declared, made or paid after the date of issue.

Applications have been made to the Financial Conduct Authority (the "FCA") for admission of the Placing Shares to the premium listing segment of the Official List maintained by the FCA and to London Stock Exchange plc ("LSE") for admission of the Placing Shares to trading on LSE's main market for listed securities ("Admission"). Admission and settlement of the Placing Shares is expected to take place on or around 8.00 a.m. on 25 July 2023.

Following Admission, the Company will have a total of 52,850,780 Ordinary Shares in issue. There are no Ordinary Shares held in treasury and therefore the total number of voting rights in the Company is expected to be 52,850,780.

Statement of Directors' responsibilities

The Directors confirm that the condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

·      material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

On behalf of the Board

Iain McCusker - Chairman

Mark Lawrence - Chief Executive

Trevor Mitchell - Finance Director

13 July 2023