TClarke plc

Results for the year ended 31 December 2023

TClarke delivers record revenues of £491m

TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its preliminary results for the year ended 31 December 2023.

Financial Highlights

2023 summary

·      Group delivering on its growth strategy

·      Revenue up 15% to £491m

·      Forward order book up 70% to £943m

·      Operating margin of 1.9% (2022: 2.7%), in line with the Company's trading update of November 2023

·      Strong balance sheet

·      Net Cash £19.3m (2022: £7.5m)

·      Net Assets £53.4m (2022: £38.7m)

·      Successful equity placing raised gross proceeds of £10.7m during the period

·      Data centre business expanding rapidly with £346m of orders (2022: £88m)

·      Progressive dividend policy with total dividend up 10%

·      Apprentices now number 247 (2022: 210) making up 18% of workforce

·      Total type 1 and 2 emissions fall to 4.4 tCO2e/£m revenue (2022: 4.8 tCO2e/£m revenue)

Mark Lawrence, CEO commented:

"Initiated in March 2021, our ambitious journey aimed to double our revenues through organic expansion. It is very pleasing to report that in 2023 we successfully achieved these growth plans.

Our growth reflects the high quality of our operations and the talent and commitment of our people, supply chain partners and the ongoing support of our clients.

The Group boasts a robust forward order book comprising top-tier projects in our target sectors, underpinned by a strong balance sheet with our net assets having increased by 38% compared to 2022, reflecting our financial strength.

Looking forward, we are poised to maintain our progress in our targeted markets, positioning us favourably to achieve our growth plans for 2024 and beyond."

-ends-

Date: 15^th March 2024

For further information contact:

TClarke plc

Mark Lawrence Group Chief Executive

Trevor Mitchell Finance Director

Tel: 020 7997 7400

 www.tclarke.co.uk

Cavendish Capital Markets Limited (Corporate Broker)

Ben Jeynes (Corporate Finance)

Dale Bellis / Andrew Burdis (Sales and ECM)

Tel: 020 7220 0500

 www.cavendish.com

RMS Partners

Simon Courtenay

Tel: 020 3735 551

Chairman's Statement

2023 has been another year of significant achievement for TClarke. In a very challenging marketplace revenue increased by 15% to £491m (2022: £426m). The composition of this revenue number and order book reflects the successful implementation and delivery of our strategy in our chosen markets.

Our strategy is to pursue organic growth by focusing on our five core market sectors, whilst building our market presence in data centres, large projects outside of London, smart buildings and healthcare. Whilst revenues from these areas reduced to £189m in 2023 (2022: £220m) they form a substantial part of our Forward Order Book with data centres alone accounting for £346m.

Our forward order book now stands at £943m, an increase of 70% (2022: £555m) which again demonstrates the successful implementation and delivery of our strategic development plans.

In common with the wider market, we have faced significant economic and political upheavals and uncertainties throughout 2023, and this has perhaps been particularly the case in our Engineering Services sector. Despite this, we have achieved an operating profit of £9.4m in 2023 (2022: £11.5m), which is a very creditable result given the uncontrollable external pressures we have had to manage this year. This performance results not just from the successful implementation of our strategy, but also from the effective and continuous strategic and operational management and focus on delivery and performance.

During the year we completed a successful share placing which raised additional net proceeds of £10.1m. The rationale behind the placing was to increase our working capital levels to support our increased levels of activity and the changing nature of our working capital requirements given the increased size and complexity of current and future projects. The placing was oversubscribed, and new shares were taken up by both existing major shareholders and several new institutional investors. The support and increased investment by both existing and new shareholders through this placing is further evidence of the recognised success of our chosen strategies and investor confidence in our forward growth and performance.

We remain committed to a progressive dividend policy while at the same time balancing the interest and needs of all stakeholders. We are proposing a 2023 final dividend of 4.525p per share (2022: 4.1p) which together with the interim dividend of 1.375p paid in October 2023 brings the full 2023 dividend to 5.9p per share (2022:

5.35p), an increase of 10%.

We have continued to invest in our responsible business activities, and I'm extremely proud of the enormous amount of work and innovation by our teams in enabling us to address climate change and deliver social value to the communities where we work.

Our manufacturing facilities in Stansted and Coatbridge have enabled TClarke to significantly reduce its carbon footprint. In addition, investment has been made into our carbon calculator for calculating Scope 3 emissions; information from which has been used on several tenders.

During the year our offices switched to 100% renewable energy, and we have introduced our first wave of electric vans within the Group's fleet.

Our teams have continued to build partnerships with schools, charities, and social organisations to provide work and training opportunities for local communities and introduce young people to careers in construction. This will help promote diversity while building a talent pipeline for the industry. We have been decarbonising schools, making them more energy efficient.

We continue to be the leading provider of apprenticeships in our sector, with 247 apprentices currently in place across the Group. This represents 18% of the total workforce (2022: 16%) - significantly more than the industry norm of 5%. This is a positive and substantial investment made with our confidence in TClarke and the future.

As we look forward to 2024 and beyond it seems unlikely that the current significant external economic and national and geopolitical challenges will lessen. Despite this, I look to the future with confidence for TClarke. We have a significant and growing order book at record levels. Our strategy is delivering and the successful share placing in 2023 demonstrates the confidence and support of the investment community in our performance and prospects. Our management, delivery focus and capabilities give TClarke the ability to continue to grow and prosper.

As ever, however, it is the collective and outstanding effort and output of our people which delivers the distinctive TClarke brand - a brand which is very strong, built upon our reputation for high quality engineering, reliability and on time delivery. It is our people and our brand that enable us to grow and perform and to face the future and its challenges with confidence.

Chief Executive's Report

An effective model and a fresh target for growth

In March 2021, we began a journey to double our revenues. As we approach and pass this goal, the Company will continue to deliver organic growth, delivered with our consistent commitment to strong engineering with good values - and achieved without the costs or risks of acquisition.

We are able to increase our growth target significantly only because we can rely on the steadfast support we receive from our partners, customers, shareholders, and most importantly, our dedicated TClarke team, even amidst ongoing market challenges. I extend my heartfelt thanks to each of you for your invaluable contribution to our ongoing achievements.

This business model outputs sustainable growth

The challenges of inflation and supply that persisted throughout the year appear likely to persist further due to conflicts around the world. These factors continue to affect our markets, yet our robust business model and risk management practices enable us to mitigate risks, minimise disruptions, and capitalise on opportunities to keep on track with growth.

Once again in 2023, this business has succeeded in winning high-quality work, delivering it to our clients' satisfaction, and building our resource of people, skills, and capabilities to enable further headroom for growth.

Organic growth of this kind is sustainable. It allows us to broaden our client base, diversifying our risks and increasing both the scope and scale of opportunities available to us. This growth increases our resilience, while also increasing the value delivered to our stakeholders.

Together we operate a consistent and straightforward strategy

We operate in competitive, commercially driven markets, delivering complex engineering services. But our strategy is simple, fully understood by our people, and executed with precision across our business.

We maintain a disciplined and selective approach to tendering. We do not tender for projects where the margin is unacceptable.

We focus on workstream opportunities within five market sectors which we understand well, where our brand is known, where opportunities for growth exists and where we have market-leading expertise and skills.

We build and invest in our resource to maximise operational flexibility, adopting and pioneering new services like MMC (Modern Methods of Construction) which significantly expand our resource capabilities. We also balance and flex our growth across and between these sectors to take advantage of market opportunities and cycles and manage our risks effectively.

This approach has been followed consistently and fine-tuned, year by year. Our investments in systems, processes and skills have been focused on improving our ability to deliver this strategy.

Our goal in each of our five core markets is to be 'contractor of choice' in the marketplace, recognised for the quality and value of our work.

Every team in the business understands the strategy and what it requires from us. I am very proud of the performance levels which our people have achieved throughout the year. We can always do better - but their

focus has been excellent and should be recognised.

Delivering record revenues

2023's record revenues of £491m are headlined by our performance in the Engineering Services market sector, but fully supported by strong revenues across all markets.

Large projects outside London achieved notable growth from £37m in 2022 to £88m in 2023. This reflected a step change across our regional operations - for example, during the year we were able to report the doubling of the average Engineering Services tender size in Scotland and a total of 19 projects of £5m + being delivered across our regions.

Delivering record forward orders

Our success in 2023 can be measured in the exceptional growth in our forward order book. In competitive markets, clients have actively sought to lock in TClarke teams to deliver their projects. Our order book has grown 70% in the last year, from £555m in 2022 to £943m in 2023. This delivers a major strategic advantage - allowing us to manage efficiently, invest for value and select future projects from a position of greater strength.

Although 2023's order book growth has been led by Technologies, which has more than trebled from 2022, that should not mask the exceptional growth enjoyed in Engineering Services and Infrastructure.

The Infrastructure order book has grown 47% compared to last year to £178m - reflecting both our long-term play in the healthcare sector and pleasing growth in other sectors including defence.

Engineering Services orders are up 39% - reflecting both our ongoing strength in major London markets and our growing presence and relationships across the country.

The order book growth for Technologies of 223% is in large part due to our growing reputation and leadership in the data centres market. Appetite and demand for TClarke teams and services, matched by our expanding resource base and skills, make this a strong area for our business. As the data centre industry approaches an 'iPhone moment', with the adoption of AI accelerating demand and need for data centre services, we see substantial opportunities in the years ahead.

Delivering the same unique brand experience

We are now entering our 135^th Anniversary year.

In 1889, it was TClarke's 'wires encased in fire-proof materials' that enabled electrification for Royal Palaces including Windsor Castle and St James' Palace. Modern Methods of Construction (MMC), Smart Buildings and Alternative Energy Solutions are just three of the technologies where our leadership is enabling progress today. Our brand reputation has been built one project at a time during this year, just as it has every year since 1889. Today it operates as a significant commercial asset alongside our financial strength - allowing people to place their trust in TClarke.

I am very pleased to report that in 2023 our ability to retain clients remains central to our success. During the year, 92% of projects have been with repeat clients and/or principal contractors. At the same time, particularly in the field of data centres, we are also building a broad new portfolio of long-term partners, operating frequently as the General Contractor (GC) in these projects, where the building services dominate.

The continued strength of our business is due in no small part to the long-term relationships we enjoy - with major

developers in London, housebuilders in Scotland and the NHS and defence sectors nationwide to name just a few. Our retention rate and the depth and length of relationships we build with our clients and supply chain is testament to the strong culture at all levels within our business.

Everything starts with our Resource

Culture depends on people. Once again, this year we have invested in excess of £6m in our apprentices across the UK and had 247 apprentices within the business (compared with 210 in 2022). Moreover, in 2023 we also reported a record 900 applications for our apprenticeships. This substantial commitment and interest creates a pipeline of future talent, designed to deliver both skilled operatives and future leaders in the volume and quality we require to meet our needs for growth. It also means that TClarke has deep roots in our local communities.

Offsite manufacture allows us to prefabricate major components of a building's engineering services in safe, factory conditions - and vastly improve efficiency and onsite logistics and environmental performance. During 2023 our two prefabrication facilities in Stansted, Essex and Coatbridge, Central Scotland completed a number of successful projects for our clients. Our confidence in resetting growth targets is only possible because of this exceptional resource of people, skills and facilities in-house. We keep investing and innovating to create further headroom for growth. Our competitors, whose models are overly dependent upon the use of sub-contractors, cannot achieve this level of confidence.

Our people build and retain Engineering Expertise

In 2023 our Bankside Yards project delivered a new industry benchmark for integrated offsite manufacture, helping achieve the UK's first fossil-fuel free major mixed-use development. This was one of several major London Engineering Services projects in 2023 where TClarke teams advanced the industry standard - in everything from smart buildings to upgraded energy performance.

During 2023, TClarke London was also highly successful in quietly delivering some extremely complex major projects - including our largest Engineering Services project ever. These performance highlights in London were

fully matched nationwide by the delivery of high profile, complex projects ranging from laboratory suites at Sawston Unity Campus in Cambridge, to numerous scanning facilities for hospitals across Britain to The Bristol Beacon - the year's largest arts project outside London.

Within the world of data centre engineering, TClarke progressed at pace in 2023, not only delivering £100m of revenue but securing a pipeline of £346m. These project wins are far more than figures in a financial report - they

directly reflect the fact that we have made ourselves acknowledged leaders in the engineering of data centres. Our engineering expertise - in particular the scale and number of high-quality in-house teams we can offer - has been the single most important factor in driving the growth of our data centre business.

Overall, our depth of engineering experience and talent, our passion and pride to complete projects successfully for our partners and track record of complex landmark projects is one that no other team in the market can match. Crucially, due to our commitment to in-house careers, our engineering expertise stays within our business and builds over time. This body of knowledge has grown yet again in 2023, allowing us to hand pick the right team for our clients' project needs - from our own people.

A Responsible and progressive business

As well as being a high-quality engineering services business, TClarke has played a progressive role in society throughout 2023, in directly tangible ways that impact our local communities.

Our nationwide apprenticeship scheme sets the industry Gold Standard for quality - measured by its scale within our business and our consistently high percentages of successful completions. We need it because of our longstanding belief in high quality in-house careers, career development and employment for our people. During 2023 our directly employed workforce increased by 9%. Our number of training days also increased by 62%. The significant investments we make every year in local people are at the heart of our difference and the substantial social value which TClarke delivers to our communities. We work hard to offer our teams the best environments to collaborate, share knowledge, work safely and build careers. We are also proud to support many local community projects, charities and sporting teams for boys and girls of all ages nationwide.

At the start of 2023, we launched 25 by 28 - our five-year plan to fill 25% of our apprenticeship and training positions with women by 2028. During our 2023 apprenticeship intake we took our first small steps to make that a reality. Over the next five years we will continue to work at what is a deliberately ambitious target.

We have set the bar at this level because a fully diverse workforce, fit for the future, accessing the greatest range of talent, is a prize we want to win.

By collaborating with partners across our industry and taking the lead on such a major issue, we also recognise that what we achieve here will create far wider value and our successes will help reset everyone's standards and expectations.

Most importantly of all, TClarke is committed first and last to the safety and wellbeing of all our people and those with whom we work. During 2023 these commitments were expressed in a wide-ranging series of safety events, training, services and metrics for our staff to improve safety performance in every way we can. The increase in usage of our You Say You See reporting tool of 45% has been one of many highlights achieved during the year.

Outlook

The strength of our £943m forward order book is matched by a robust pipeline of current opportunities and a strong balance sheet with net assets of £53.4m. We have clarity in our strategy, balance across our sectors and a depth of available resource and capabilities across our business for further growth.

These strengths have allowed the board to approve our next medium term growth target of £650m. Within that medium term outlook, we see that our Technologies businesses have continued strong prospects, fueled by the emergence of AI, driving ongoing growth in data centre markets. At the same time, the advance towards Net Zero is driving the adoption of new alternative energy and smart buildings technologies, transforming needs across our Engineering Services markets. Our continued leadership in London engineering services and our growth in infrastructure and large regional projects adds further confidence.

While we expect and plan for challenges on every scale, we are looking forward to continued growth for all our stakeholders, achieving optimum revenues and margins. We are also focused on doing things the right way - the TClarke Way.

Our brand has been around for one hundred and thirty-five years; right now, our leadership in critical new engineering services technologies is more assured than ever.

That fact is not determined by our board but by the customers who choose and the TClarke teams who deliver. It is a matter of great pride that we have been able to immediately revise our target upward. There is great optimism in our business - based on the ongoing potential for organic growth we see in the immediate years ahead.

Group Financial Review

Key Highlights

Progress against strategic objectives:

The Group has continued to grow strongly recording revenues of £491m (2022 £426m). 2023 marks the end of the 3 year growth plan to grow revenues organically from £300m pa to £500m pa. This plan has substantially been achieved. In addition through the opportunities and orders TClarke has generated we are confident that our growth will continue throughout the next period. Our order book has grown to £943m (2022 £555m) as shown below:

We have seen revenue growth across all of our market sectors in 2023, with the exception of Technologies, where the phasing of our data centre work has seen a number of large projects complete during the year, with the next batch of large projects featuring heavily in our secured work for 2024.

Summary of Financial Performance

Dividend per share represents the interim and final dividend proposed or paid for the year in question.

In line with our strategic objective of targeting large jobs outside London, 2023 revenue for the year for such jobs (project size >£5m and based outside the M25) is now £88.2m (2022: £37m). We have also seen continued strong performance in our healthcare and smart buildings offerings.

Operating profit for 2023 was £9.4m (2022: £11.5m). Earnings per share were 13.75p for the year (2022: 19.60p) on an operating margin of 1.9% (2022: 2.7%). This was below our 3% target, reflecting several strategic decisions taken by management to preserve the business's strong market and financial position in view of the construction sector's turbulent trading conditions. These decisions have included early settlement of final contract amounts and the changing of some supply chain partners mid-contract to protect project completion dates. On one large contract in particular it was necessary to replace a key part of our supply chain and re-procure the work across a number of smaller packages. It is anticipated that these projects will continue to be delivered to their project programmes albeit at reduced margin.

The Group took a number of actions during the year to strengthen its balance sheet, including the raising of net proceeds of £10.1m by way of an oversubscribed placing of new ordinary shares in the Company. The issue price was 122p per share representing a 14% discount to the closing price of 141.5p on 5 July 2023. The placing was for 8,749,337 ordinary shares with a nominal value of 10p. The proceeds provide additional resources with which to capture and deliver attractive contract opportunities in the London business and in doing so drive further growth and margin expansion. The placing attracted a number of new institutional investors and in doing so has broadened our shareholder base.

Our growth has not been driven by acquisitions and this will remain our policy going forward. TClarke remains financially secure, ending the year with net cash of £19.3m (2022: £7.5m) with £30m of bank facilities at its disposal. Despite the tough prevailing market conditions and the high level of insolvencies amongst our supply chain, competitors, and potential customers, we are pleased to report that our robust credit control processes have limited our bad debt expense for the year to £0.3m (against total revenue of £491.0m), and in line with

our historical average.

Net finance costs were £1.8m (2022: £1.2m), comprising: a £0.4m increase in bank interest and facility fees to £1.0m (2022: £0.6m); the Group's defined benefit pension scheme interest charge of £0.6m (2022: £0.4m) and an interest charge of £0.3m arising from leases (2022: £0.2m), offset by £0.1m of interest received on cash balances.

The tax charge for the year was £1.1m (2022: £1.9m). TClarke maintains an open and collaborative working relationship in all interactions with HMRC, and there are no uncertain tax positions at present.

The Group paid its 2022 final dividend in full in June 2023 and an increased interim dividend in September 2023 of 1.375p (2022: 1.25p). The Board is proposing a final dividend of 4.525p (2022: 4.1p). The total proposed dividend therefore rises to 5.9p (2022: 5.35p), an increase of 10%. The dividend is covered two times by earnings.

TClarke recognises that many of its shareholders invest for dividends.

Cash Flow and Funding

Cash balances totalled £29.3m at 31 December 2023 (2022: £22.5m). £10m was drawn down under the Group's Revolving Credit Facility ("RCF") at 31 December 2023 (2022: £15m), resulting in net cash of £19.3m at the 2023 balance sheet date, an improvement of £11.8m on the prior year (£7.5m).

The increase in net cash has been largely driven by the share placement in July together with the Group's operating profit for the year once allowances have been made for other cash outflows such as dividend payments and the Group's commitment to the pension deficit reduction plan. Furthermore, the Group's continued focus on strong credit control processes has ensured that the growth in revenue has been achieved without any significant increase in working capital balances.

The Group's banking facilities comprise a £5.0m overdraft facility and a £25.0m revolving credit facility ('RCF'), both with National Westminster Bank plc, with the level of usage available dependent on covenant compliance. The RCF charges commitment fees at market rates and drawings bear interest at a margin of 1.9% above SONIA. Interest is charged on the overdraft at 2.00% above base rate. The RCF includes financial covenants in respect of interest cover and net leverage ratios which are tested quarterly. The RCF is available until 31 August 2026 and the overdraft facility is subject to annual review.

The Group was compliant with its obligations under the RCF and the overdraft facility throughout the year and the Board's detailed projections demonstrate that the Group will continue to meet its obligations in the future and is expected to operate well within its existing facilities throughout the next three-year period. The Group also has in place £70.1m of bonding facilities (2022: £65.1m), of which £37.7m were unutilised at 31^st December 2023 (2022: £34.3m).

Defined Benefit Pension Scheme Obligations

A formal actuarial valuation of the Group's defined benefit pension scheme was conducted at 31st December 2021 showing a deficit of £19.8m, representing a funding level of 71%. The pension scheme's actuary also looked at the position at 31 December 2022 in view of the worsening macroeconomic conditions. At that date the funding level remained at 71% but the deficit was estimated to be approximately £11m.

Following the valuation, the Group has committed to a deficit reduction plan to eliminate the deficit over an 8 year period, through additional contributions of £1.3m per annum. The deficit on the pension scheme, as measured on an IAS 19 valuation basis for inclusion in these financial statements, has now reduced to £11.8m (2022: £12.9m). The reduction of £1.1m over the year has been largely driven by the £1.3m additional contributions made by the

Group as part of the deficit reduction plan.

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. We have built on our existing strong balance sheet and net assets are now £53.4m (2022: £38.7m), an

increase of 38%. The increase largely reflects the combined impact of the Group's profit after tax for the year, the proceeds of the share placement, dividends paid, and the reduction in the defined benefit pension deficit.

Goodwill stood at £25.3m at the year-end (2022: £25.3m). The Board has undertaken an impairment review in respect of goodwill and has concluded that no impairment is necessary.

Financial Risk Management

The Group's main financial assets are contract and other trade receivables, 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.

Accounting Policies

The Group's consolidated financial statements are prepared in accordance with the requirements of the Companies Act 2006 and in accordance with UK-adopted international standards. There have been no new accounting policies adopted in the year.

Consolidated Income Statement

For the year ended 31^st December 2023

Consolidated Statement of Comprehensive Income

For the year ended 31^st December 2023

Consolidated Statement of Financial Position

As at 31^st December 2023

Consolidated Statement of Cash Flows

For the year ended 31^st December 2023

Consolidated Statement of Changes in Equity

For the year ended 31^st December 2023

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.

The financial statements included in this preliminary announcement have been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority, and the principles of UK-adopted international accounting standards, but do not comply with the full disclosure requirements of these standards. The financial information for the year ended 31 December 2022 is derived from the statutory financial statements for that year which have been delivered to the Registrar of Companies. The auditor reported on those financial statements: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006. The financial information has been prepared on a going concern basis under the historic cost convention as modified by the revaluation of land and buildings.

The unaudited financial information contained in this announcement does not constitute the statutory financial statements of the Group as at and for the year ended 31 December 2023, but is derived from those financial statements, which have been prepared in accordance with UK-adopted international accounting standards. The financial statements themselves will be approved by the Board of Directors and reported on by the auditor and then subsequently delivered to the Registrar of Companies following the Company's Annual General Meeting. Accordingly, the financial information for 2023 is presented as unaudited in this announcement.

Note 2 - Significant accounting estimates

In the application of the Group's accounting policies, the Directors are required to make 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 profit recognition for construction contracts

In order to determine the revenue and profit recognition in respect of the Group's construction contracts, the Group has to estimate the total costs to deliver the contract as well as the final contract value. The Group has to allocate total expected costs between the amount incurred on the contract to the end of the reporting period and the proportion to complete in a future period. The assessment of the total costs to be incurred and final contract value requires a degree of judgement and estimation.

The final contract value may include assessments of the recovery of contractual variations which have yet to be agreed with client, as well as additional compensation claim amounts. The amount of variations and claims are often not fully agreed with the customer due to timing and requirements of the normal contractual process. Therefore, assessments are based on an estimate of the potential cost impact of the compensation claims and revenue is constrained to amounts that the Group believes are highly probable of being received. The estimation of costs to complete is based on all available relevant information and may include estimates of any potential defect liabilities or liquidated damages for unagreed scope or timing variations. Costs incurred in advance of the contract that are directly attributable to the contract may also be included as part of the total costs to complete the contract.

Retirement Benefit Obligations

The cost of the defined benefit pension scheme and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date, taking advice from independent actuaries. Details of the key assumptions are set out in note 9.

The valuation is most sensitive to changes in the discount rate assumption. In determining the appropriate discount rate, the Group considers the interest rates of corporate bonds, extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The mortality rate is based on publicly available mortality tables. These mortality tables tend to change only at intervals in response to demographic changes. Future salary increases and pension increases are based on expected future inflation rates.

Note 3 - Segment information

(i) Change in operating segments

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 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 and discrete financial information is no longer prepared at a more disaggregated level.

This approach has also been reflected in the preparation of this financial information which as a result no longer require separate segmental analysis, as it is only at a Group level where the definition of an operating segment is met and this information is shown in the primary statements themselves.

(ii) Revenue analysis

Note 4 - Taxation

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.

(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 share options granted under the Save As You Earn schemes.

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.

Note 6 - Dividends

The Directors are proposing a final dividend of 4.525p (2022: 4.1p) per ordinary share totalling £2.4 million (2022: £1.8m). The dividend has not been accrued at the reporting date.

Subject to approval at the Annual General Meeting, the final dividend will be paid on 14^th June 2024 to shareholders on the register as at 17^th May 2024. The shares will go ex-dividend on 16^th May 2024. 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 2023 final payment, may do so by contacting Link Group on 0371 664 0381. The last day for election for the final dividend reinvestment is 24^th May 2024.

Note 7 - Trade and other receivables

Trade and other receivables are analysed as follows on the statement of financial position:

Note 8 - Trade and other payables

Note 9 - 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:

The key assumptions used to value the pension scheme liability are set out below:

Note 10 - Notes to the statement of cash flows

(i) Reconciliation of operating profit to net cash generated from operating activities

(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:

Net cash after deducting total borrowings was as follows:

Note 11 - Related party transactions

(i) Key management personnel

The key management personnel of the Group comprise members of the TClarke plc Board of Directors and the Group Management Board. The key management personnel compensation is as follows:

Further disclosures, including details of the highest-paid Director, are included in the Directors' remuneration report in the latest annual report.

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 12 - Contingent liabilities

Group banking facilities of £30m and surety bond facilities of £70m are supported by cross guarantees given by the Company and participating companies in the Group. All operating companies within the Group are included within the Group banking arrangement, and National Westminster Bank plc has a floating charge over the assets of the Group. There are contingent liabilities in respect of surety bond facilities, guarantees and collateral warranties under contracting and other arrangements entered into in the normal course of business.

As part of a Group reorganisation, a subsidiary company, TClarke Services Limited, became the principal employer of the scheme with effect from 23rd December 2016, and the pension scheme liability and related deferred tax asset were transferred to TClarke Services Limited at that date. The Company and its subsidiary, TClarke Contracting Limited, have provided a guarantee to the trustees of the scheme in respect of TClarke Services Limited's obligations to the pension scheme.

Note 13 - Subsequent events

There were no subsequent events that affected the financial statements of the Group.