T. Clarke plc : Clarke(T.) PLC - Final Results

TClarke looks ahead with confidence

TClarke plc - Results for the year ended 31st December 2012

*Underlying profit consists of profit from continuing operations adjusted for amortisation of intangible assets, net profits on the disposal of property assets and non-recurring costs, being restructuring costs, additional purchase consideration and long term employee benefits arising from prior acquisitions.

New contracts secured include:

·      JP Morgan, 60 Victoria Embankment, London

·      Mark Lane, London

·      IMG Media, Stockley Park

·      Arcadia, Bluewater Shopping Centre

·      Croydon Interchange, Croydon, Surrey

·      Cardigan Health and Social Care Centre, Cardigan Bay

·      ITV Studios London, External Lighting Scheme

·      Falmouth Primary School, Cornwall

·      RAF Lakenheath Munitions Lighting

·      Sheffield Mail Centre, Chiller Replacement

·      South Dock Stage Complex, Pinewood Studios

·      Witham Leisure Centre, Essex

Mark Lawrence, Chief Executive commented:

"TClarkeand our people delivered a solid, profitable performance despite all the challenges of the construction sector.

It is reassuring for our shareholders as well as the clients and the contractors that we work with that we continue to be financially strong, and that our reputation for delivery is rock solid.

We have an excellent forward order book with good visibility to a number of fully committed high quality opportunities particularly in the London commercial market".

-ends-

Date: 19th March 2013

For further information contact:

Chairman's statement

Results

Despite well reported margin pressures in our marketsTClarkehas delivered profitable financial results for the year with revenue and underlying profit before tax slightly ahead of our expectations.

Group turnover increased by 5.5% to £193.8 million (2011: £183.8 million).  We maintained our strategy of securing contracts at commercially acceptable levels with the underlying operating profit for the year being £2.9 million (2011: £4.7 million).

All three operating divisions were profitable before non-recurring costs and we are pleased that the strategy for our Scottish business resulted in an improved performance and a return to underlying profit.

Cash

Measures taken across the group and a consistent focus on cash management has seen net cash improve to £5.6 million as at 31 December 2012 (31 December 2011: £0.6 million).

We expect the group's net cash position to remain positive overthe course of the normal business cycle; some cash will be used to fund the working capital requirements associated with new projects.

The financial position of the group remains strong and we are pleased to report that the group remains debt free.

Dividends

The Board proposes to maintain the final dividend for the year at 2.0p (2011: 2.0p). The final dividend will be paid on 17th May 2013 to shareholders on the register as of 19th April 2013.

Together with the interim dividend paid of 1.0p, (2011: 1.0p), this brings the total dividend per share for the year to 3.0p (2011: 3.0p).  Dividend cover for the full year at the underlying level was 1.5 times (2011: 2.5 times).

Strategy

TClarkeis a nationwide building services operation covering the full range of mechanical, electrical and information communication technologies (ICT) services from design and installation to commissioning, and maintenance. Our strategy is to targeteight sectors in the wider building services markets underpinned by the group's historic strength of mechanical and electrical contracting.

We have concentrated on maximising the value from our existing operations; we have targeted large and complex projects particularly in the London commercial and UK data centre sectors; where necessary we have restructured in our most challenging markets and implemented group-wide business improvement initiatives. These initiatives, together with others undertaken at a local level, have contributed towards maintaining our profitability and record forward order book. Contributions from FM workstreams were £25m in 2012 and now provide for an increased level of recurring revenues each year.

We have no current plans for acquisitions but will target sustainable growth by expanding our existing businesses into areas where we do not have a local presence, in particular we believe there are opportunities in and around the West Midlands.

Employees

The success of London in 2012 was seen around the world, and I am proud of the contribution that TClarkemade delivering iconic world-class engineered buildings and venues such as the London 2012 Stadium, The Emirates Airline, The Shard and Westfield Stratford City.

I would like to thank all of our employees across the UK for contributing to this result. Our employees share the common goal to excel in all aspects of our business; meaning that our engineers', and skilled operatives', technical expertise, project experience and capability to deliver exceeds our clients expectations.

We ask everyone who works with us at TClarketo adopt and share our commitment to health and safety, the result is an exceptional culture and ethos and I am particularly proud that we are able to report a continued improvement in our accident record including over 90% of projects in the year being undertaken without a lost time accident.

Outlook

Whilst not underestimating the challenges we face in 2013, during which we expect our markets to experience fierce competition for available workload and continuing margin pressure, we will make the most of opportunities as they arise. Going forward we have good visibility of a number of fully committed high quality opportunities particularly in the London commercial market. We remain committed to providing the highest quality of service to our clients, together with the best possible return for our shareholders.

The board remains confident in the resilience of the business and we believe the group will continue to improve and benefit from the wider range of services that we offer to our clients.

Our excellent operational capabilities and financial strength support our strategy and continue to differentiate TClarkefrom its competitors and will underpin long-term growth.

On behalf of the board I thank our shareholders, clients and suppliers for their continued loyal support.

Russell Race

Chairman

19th March 2013

Business review

Overview

The results delivered in 2012 demonstrate the ability of TClarke to secure work in the weakest of markets. Against this background we are pleased to report that our current order book stands at £230 million, up over 20% from this time last year (2011: £190 million).  Not only is our forward order book at a record level but, more importantly, we have secured new projects and repeat business with quality blue chip clients and contractors.

We have continued to see local and national competitors exit the market, usually as a result of sustained unrealistic bidding. We have made it clear previously that our group businesses will not bid for work at negative margins, and at times we have chosen to exit a tender process that would have resulted in a commercially unsustainable bid. In the longer term supported by our wider services offering we are confident margins will improve when we return to more normal levels of market activity.

90% of the group's revenue is now delivered by businesses trading under the TClarke brand, the exceptions being DGR in London and Veale Nixon in Newcastle where we consider there is added value in supporting and maintaining a specific local identity. Regardless of brand we manage all our businesses in a consistent and cohesive manner.

As a group we have the ability to quickly identify and react to commercial opportunities across the country and at a local level. During the year we secured two of our largest ever regional contracts away from the core London business, demonstrating the success of the strategy we have in place to be recognised as a truly national contractor.

TClarke South

The South, the largest of our three operating divisions, includes our London businesses as well as: Bristol, Cardiff, Derby, Harlow, Kimbolton, Kings Lynn, Peterborough, Plymouth, Sittingbourne and St Austell.

In the capital we continue to secure some of the most significant schemes that have come to market and whilst price remains the most influential factor, financial strength, reputation and quality of people plays an equally important part. When a client decides on a project award, it is these secondary factors that differentiate TClarke from its competitors.

DGR, our mechanical services business, complements our London electrical capabilities where we are able to give our clients a truly combined services offering. DGR continues to maintain and build its own relationships and reputation with clients and contractors. We believe there is a need for more quality mechanical services companies in the London market and DGR is well positioned to take advantage of opportunities with the backing of the group.

We are delighted with the progress that has been made at Cardiff; our team has been successful in building the TClarke name and presence in Wales, and has secured some significant projects such as the Cardigan Health and Social Care Centre. To reaffirm our commitment to the area the team will move into larger premises in the spring of 2013.

TClarke North

Three locations serve our northern operations, Accrington, Leeds and Newcastle.

Our Northern businesses delivered another positive performance for the year, securing a number of projects, particularly in the public, defence and nuclear sector.

H&C Moore based in Leeds has now adopted the TClarke name which will allow it to align its operations more closely with those of the group.

TClarke Scotland

Scotland returned an underlying profit this year, its improved performance the result of restructuring the business and focusing on sectors where there are opportunities both in terms of margin and future works.

Improved performances were recorded in residential, engineering and IT-led projects.

The success of our partnerships within our residential business can be measured with the year-on-year increase in the number of homes delivered:

2009 - 400

2010 - 500

2011 - 600

2012 - 1000

2013 - 1300* 

*Secured to Date

The above figures represent the number of residential homes where we have undertaken all or part of the mechanical, electrical and smart home technologies installations. Our envious position in being able to offer the full range of services is reflected in the number of principal house builders across Scotland utilising our services.

We are confident that our Scottish business will continue to strengthen utilising relationships with its own clients and those from the wider group.

Operational review

We are working in a number of ways to deliver the business strategy to be recognised nationwide as a top five contractor in the building services sectors in which we operate. We continue to focus on eight key sectors in building services that offer growth potential, and this has helped the group to broaden the range of services we offer.

Mechanical and electrical contracting remains at the centre of the business but the seven other sectors now provide over 40% of the group's revenue and will support future growth and generate recurring revenues.

M&E contracting - 2012 revenue £117m

TClarkeis a proven leader in M&E contracting and this remains central to the group right across the UK.

We apply our technical expertise on the most complex and large-scale projects.  Clients and contractors see us as integral to their success; we anticipate their needs and deliver on our commitments, and they place their confidence in TClarkeand our highly skilled workforce, supported by technically experienced engineers who set high standards and continue to innovate.

Going forward we have good visibility of a number of fully committed high quality opportunities particularly in the London commercial market.

Examples of our projects;

·      20 Fenchurch Street, London

·      240 Blackfriars, London

·      Bespak, Kings Lynn

·      Brindley Place, Birmingham

·      British Energy, Kent

·      Canadian Estate, Bulford

·      Campsmount School, Doncaster

·      Chiswick Park Building 6, London

·      Forth Crossing, Control Centre

·      Imperial Tobacco Headquarters, Bristol

·      Nazareth House, Plymouth

·      The Eye, Bristol

·      The Redcar Beacon

·      The Place, London Bridge Quarter

·      Transforming Tate Modern, London

·      South Dock Stage Complex, Pinewood Studios

·     Waitrose, Various locations

·      West Dorset District Council Offices

Intelligent buildings - 2012 revenue £4m

By integrating a number of building systems and solutions TClarkeIntelligent Buildings can help clients maximise the efficiency of their buildings.

Across the UK our solutions and capabilities include:

?      Structured cabling systems

?      Network infrastructure and security

?      Data centre and server room installation

?      Wireless networks

?      IP CCTV solutions

?      IP access control systems

?      IP TV distribution

?      IP telephony

?      Fire alarm integration

?      Audio visual installations

?      Central monitoring and control systems

?      Graphical User Interfaces (GUI)

?      Building Management Systems (BMS)

We have technology partnerships in place that strengthen and support our reputation, allowing us to bid for opportunities within the main M&E package of works and from securing stand-alone Intelligent Buildingscontracts.

Facilities management - 2012 revenue £25m

Our Facilities Management (FM) business is more than just maintenance; it can involve all types of business support processes including the care of offices, commercial or institutional buildings, such as hospitals, office complexes, arenas and schools, and across complex industrial sites for major clients. We assist clients to ensure they can operate, maintain and expand their businesses effectively.

Each project we complete becomes an opportunity for our FM business and, equally, once we have secured an FM contract we are in a unique position to benefit from other capital expenditure by our clients across their estates.

This approach has helped us to establish long-term relationships with organisations such as BAE Systems and Springfield Nuclear Fuels in the North West.

In the Midlands and the East of the UK we have on-going contracts for Defence Estates, Luminus Group, Peterborough City Council and Romec, whilst in the South we have contracts with Cornwall Care, Cornwall College, Credit Suisse, Dungeness Power Station, Imerys Minerals, Imperial College, ITV plc, and Manston Airport.

In Scotland contracts include First Group and the Scottish Prison Service.

Green technologies - 2012 revenue £3m

Sustainable development is at the core of today's buildings and green technology solutions have readily been adopted as part of the mainstream requirements of any new design.

Whilst this sector overlaps with other parts of our business, we see growth potential for the group particularly in areas such as LED lighting, waste to energy solutions and photovoltaic installations both commercially and in domestic situations.

Transport - 2012 revenue £13m

Our Transport Division provides M&E engineering services throughout the UK on a number of key transport projects. 

2012 saw the completion of The Emirates Air Line cable car system where we were responsible for the M&E as well as the full ICT installation.

We are currently on site at Victoria Underground Station to provide a refurbished and extended underground station with vastly improved and new ticket halls.

We have invested heavily in securing the required accreditations that are necessary to work in the rail and aviation sectors. Our strategy is to build upon our current portfolio of projects with our current forward order book in excess of £20 million. We are pursuing bidding opportunities, including Crossrail, London Underground and at various UK Airports.

Mission Critical - 2012 revenue £12m

Launched during the year, TClarkeMission Critical was developed from our Utilities and Technologies Division. TClarkeMission Critical is a hand-picked team of senior technical engineers who work on the most exacting data and power projects that simply cannot afford to fail, where clients are looking for the ultimate possible uptime, reliability and engineering excellence.

During the year data centre projects were secured in Corby, Croydon, Milton Keynes, Newcastle and Slough.

Other examples of TClarkeMission Critical installations are Credit Suisse replacement UPS; Deutsche Bank Power Reinforcement; and ITV London Studios new standby power generators and HV cable network upgrades. Elsewhere we are involved with projects for British Energy / EDF and Springfield Nuclear Fuels.

TClarkeMission Critical is a hand-picked team of senior engineers serving the UK, European and Scandinavian construction markets. We believe that there are significant growth opportunities in this sector, and the barriers to entry in place will ensure that competition for these types of project is limited.

Manufacturing - 2012 revenue £4m

We have manufacturing facilities, including workshops in Essex, Yorkshire and Scotland, that are utilised by all the companies within the group.

This capability gives us four key advantages. Firstly, it allows us to play our role in setting and meeting demanding project timescales by introducing off-site prefabrication. Secondly, this capability can be extremely significant in helping clients to meet sustainability targets in manageable and readily measurable ways. Thirdly, these facilities are central to our ability to innovate and improve the speed and value of what we do. Finally, prefabrication allows us to improve the quality of the work together with the health and safety of the working environment for our operatives.

TClarkehas the in-house capability to manufacture and prefabricate elements of an installation on every scale as well as to deliver high quality bespoke engineering components.

An excellent example was demonstrated at The Shard, Europe's tallest building, where we provided nearly 60km of pipework within the prefabricated multi-service modules. The Shard was successfully handed over in September 2012.

Residential and hotels - 2012 Revenue £16m

TClarkeoffers a complete service of design, installation, commissioning and maintenance for the whole residential market, from flats, family homes and student accommodation to luxury high end accommodation as well as serving the hotel sector.

We are working with some of the most well known housing and hotel groups across the country.

Our major schemes in progress (other than those previously noted in Scotland include): Temple Quay, Bristol and, in London, schemes at 240 Blackfriars, De Vere Gardens and Three Quays.

Mark Lawrence

Group Chief Executive

19th March 2013

Financial review

Group performance

The group continued to trade profitably in spite of the challenging economic conditions.

Turnover increased by 5.5% to £193.8 million (2011: £183.8 million).  Profit before tax was £1.2 million (2011: £4.9 million), with 2011 having benefited from a one off £2.2 million profit on the disposal of a property.

Underlying operating profit was down 38.3% to £2.9 million (2011: £4.7 million), representing an underlying operating margin of 1.5% (2011: 2.6%). Underlying operating profit consists of operating profit, as adjusted for: amortisation of intangible assets, profit on disposal of land and buildings and non-recurring costs.  

The net finance cost was £0.5 million (2011: £0.5 million) including a £0.4 million (2011: £0.4 million) non-cash pension scheme finance charge.

Tax expense was £0.3 million (2011: £0.9 million), giving an effective tax rate of 29.2% (2011: 18.4%).  Excluding the property sale, the effective rate of tax in 2011 would have been 29.4%. 

TClarke South

Revenue from our South operations was £129.7 million (2011: £132.3 million).

The region reported an operating loss of £0.3 million (2011: profit £1.7 million) after accounting for £0.2 million additional purchase consideration and £0.2 million long term employee benefits relating to DGR, acquired in 2010, and further restructuring costs of £0.2 million.

Underlying operating profit was £0.5 million (2011: £2.7 million), representing a profit margin of 0.4% (2011: 2.0%).

TClarke North

Revenue from our North operations increased to £48.7 million (2011: £34.5 million).

TClarke Scotland

Revenue in Scotland decreased to £15.4 million (2011: £17.0 million).  Further restructuring costs of £0.1 million were incurred to reshape the management team and enable the division to focus on its core strengths in the residential market and profitable growth areas such as IT and engineering-led projects.  This strategy has resulted in a return to underlying profit of £0.1 million (2011: loss £0.6 million), and an operating profit of £nil (2011: loss £0.7 million).

Earnings per share

Basic earnings per share were 2.05p (2011: 9.69p), and diluted earnings per share were 2.01p (2011: 9.64p). 

Basic underlying earnings per share after adjusting for amortisation of intangible assets, non-recurring costs and profits arising on property disposals and the tax effect of these items, were 4.40p (2011: 7.34p), and diluted underlying earnings per share were 4.32p (2011: 7.33p).

Dividends

The board is proposing a final dividend of 2.00p (2011: 2.00p), leaving the total dividend for the year unchanged at 3.00p (2011: 3.00p), which is covered 1.5 times by underlying earnings.

The final dividend will be paid, subject to shareholder approval, on 17th May 2013 to those shareholders on the register at 19th April 2013. The dividend will go ex-dividend on 17th April 2013.  A dividend reinvestment plan (DRIP) is available to shareholders.

Cash flow and funding

The group's cash balances improved to £5.6 million at 31st December 2012 (2011: £0.6 million) and apart from £0.1 million outstanding under finance leases (2011: £0.2 million) the group had no debt.  The group is funded by share capital and retained reserves and there are no plans to change this structure. 

Cash inflow in the year was £5.0 million (2011: outflow £6.6 million), due to a strong emphasis on working capital management.   Cash inflow generated by operations was £6.4 million (2011: outflow £6.8 million).

Pension obligations

In accordance with IAS 19 'Employee Benefits', an actuarial loss of £1.9 million has been recognised in the year, with the pension scheme deficit increasing by £1.9 million to £11.9 million (2011: £10.0 million).  The deficit reflects the historically low discount rates, based on bond prices, which have been a feature of the market in recent years. 

The last triennial valuation of the pension scheme as at 31st December 2009 showed a deficit of £7.9 million, which represents a funding level of 71.5%. The group has put in place a deficit reduction plan to eliminate the deficit over a number of years, with total employer contributions remaining at 16% of pensionable salary for three years, rising to 18% thereafter.   Employer contributions amount to approximately £0.8 million per annum.  The group has provided security to the pension scheme in the form of a charge over property assets with a market value of £3.1 million.  The next triennial valuation, as at 31st December 2012, will be undertaken during 2013. 

Accounting policies

The group's accounting policies are consistent with the accounting policies applied in previous years.

Goodwill

A significant part of the group's net assets are represented by goodwill in the underlying businesses. The board has undertaken a rigorous impairment review as at 31st December 2012. In spite of the current economic pressures the underlying businesses remain strong, and the carrying value of the remaining goodwill is supported by detailed budgets and projections. 

Net assets

Net assets excluding goodwill and other intangible assets remain positive, but have reduced by £1.5 million to £0.4 million (2011: £1.9 million) due to the impact of the pension deficit discussed above.  The group's net current assets increased to £4.2 million (2011: £3.8 million).

Summary and prospects

Despite the economic challenges we face, we have remained profitable and cash positive.  The business is in good shape with a strong order book, a committed workforce, and a quality client base and supply chain. 

Martin Walton

Finance Director and Company Secretary

19th March 2013

Principal risks and uncertainties

The principal risks and uncertainties faced by the group and the controls and mitigating factors on place are as follows:

Market conditions

The markets in which we operate have been extremely difficult. Public sector cutbacks and low levels of confidence in the private sector have restricted the opportunities available within the construction sector generally, increasing market competition for the remaining work.

The group operates throughout the UK with no overreliance on any one sector. We are actively seeking to develop further relationships with key clients and contractors, to build on our financial strength and reputation.

The board remains committed to the principle that we will not bid for work below commercially acceptable rates. It continues to make conservative assessments of final accounts from project completions and the likely outcome for a number of on-going projects. We have aligned our cost base to reflect workloads; further realignments could be undertaken if considered appropriate to reflect changes in the prevailing market conditions.

Contractual and operational risk

At any time there may be several hundred contracts in progress across the country. Inadequate supervision would result in poor quality and low productivity, both of which would result in loss of reputation and profit.  Failure to deliver projects to time, quality or budget, and contractual disputes that can arise over the scope and valuation of contracts, may make the ultimate outcome of contracts uncertain.

We are continually assessing and managing operational risk through the bidding stage to the final commissioning of an installation and handover to the client. We have experienced teams of estimators, and all bids are reviewed by a director and checks carried out to avoid incorrect or non-competitive pricing. 

Our contract engineers, supervisors, surveyors and skilled tradespeople receive regular training to meet our demanding standards.  All key suppliers and subcontractors are subject to regular performance reviews.

Our business information systems monitor profit and cash flow throughout the life of a contract, and regular review meetings are held at the contract and business unit level to monitor progress and address issues as they arise.

Regulatory risks

The group is subject to complex and evolving tax, legal and regulatory requirements. A breach of laws and regulations could lead to litigation, investigations or disputes, resulting in additional costs being incurred, civil and/or criminal proceedings and reputational damage. 

The group monitors legal and regulatory developments in the areas in which it operates, and seeks legal or other specialist advice as appropriate. It is group policy to require that all subsidiaries, employees, suppliers and subcontractors comply with applicable laws and regulations. Training is provided on legal and regulatory changes as required. 

People

Providing a consistently high quality service to our clients is only possible with the right people: attracting and retaining high calibre staff is key to our success. This is achieved through a remuneration system linked to performance, strongly embedded training schemes throughout the group and by providing opportunity and encouragement to help our people reach their full potential.

The group remains committed to providing the best training for all members of staff and draws on the expertise of its people from all group companies across the UK. However as a result of the current market conditions we have and will continue to align our business at all levels to match our current expectations.

We have continuous dialogue with the trade unions and continue to review our policies and procedures in managing this risk.

Health and safety

Failure to manage health, safety and environmental risks could cause serious injury or loss to employees or third parties and expose the group to significant financial and reputational loss and litigation.

At TClarke, health, safety and environmental considerations are at the forefront of every working and management decision and one of the prime elements considered before any undertaking. This is achieved through our senior managers participating in a recognised safety leadership scheme and operatives receiving on-going topical health, safety and environmental training. 

Pensions

The group is exposed to funding risks arising from changes in longevity, inflation and investment assumptions in relation to its defined benefit pension scheme. 

The defined benefit pension scheme is open to qualifying senior management and staff within the group. Following consultation with members, the group altered the structure of the scheme in 2010 from a final salary scheme with an accrual rate of 1/60th to a Career Average Revalued Earnings scheme with an accrual rate of 1/80th. The scheme remains open to new members.  On-going funding and regulatory requirements are monitored in conjunction with external actuarial advisers and regular meetings are held with the pension scheme trustees.

Cost inflation

Commodity prices of copper and steel are major component parts within our industry. In addition, UK prices of materials that we procure could be adversely affected by any weakness of sterling.

The majority of projects we secure do not allow for the recovery of increased labour and material costs. We have in place formal supplier framework agreements across the UK to manage and, where possible, mitigate this risk, with prices locked in through procurement at the beginning of a contract wherever possible.

Credit and counterparty risk

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.

Liquidity risk

The group's business is dependent on the availability of cash resources, banking facilities and the ability to provide performance and other bonds as necessary.

The group manages liquidity risk by maintaining adequate reserves and banking facilities, monitoring cash flows and matching maturity profiles of financial assets and liabilities within the bounds of its contractual obligations. The group arranges banking facilities and places surplus cash on deposit only with large UK financial institutions.   The group has in place an £8 million overdraft facility to help manage short-term fluctuations in working capital.

Cash flow interest rate risk

The group is exposed to changes in interest rates on its bank borrowings and deposits.

The group's financial instruments comprise cash and cash equivalents, bank deposits, overdraft facilities, contract and other trade receivables, trade balances and similar balances arising directly from operations.  Surplus cash is placed on instant access, short-term or long-term deposits at fixed or floating rates, taking into account future cash requirements based on short and medium-term cash projections. The group does not trade in speculative financial instruments.

Consolidated income statement

for the year ended 31st December 2012

Consolidated statement of financial position

as at 31st December 2012

Consolidated statement of cash flows

for the year ended 31st December 2012

Consolidated statement of changes in equity

for the year ended 31st December 2012

Note 1 -Basis of preparation

TClarke plc (the 'company') is a company listed on the London Stock Exchange, incorporated in the United Kingdom. The consolidated preliminary financial statements (the 'financial information') comprise the financial statements of the company and its subsidiaries (together the 'group') and are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 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 31st December 2012 or 2011 but is derived from the audited financial statements for the year ended 31st December 2012.  Statutory accounts for the year ended 31st December 2011 have been delivered to the Registrar of Companies.  Statutory accounts for the year ended 31st December 2012 will be delivered to the Registrar of Companies in due course and will be available on the company's website atwww.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 31st December 2011 or for the year ended 31st December 2012.

Except as noted below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st December 2011:

The following new and revised IFRSs have been adopted in these financial statements, but their application has not had any material impact on the financial statements.

·      Amendments to IAS 32 'Financial instruments : Presentation-Classification of rights of issues'

·      IAS24 'Related party disclosures' (revised 2009)

·      IFRIC19 'Extinguishing financial liabilities with equity instruments'

·      Improvements to IFRSs (2010)

·      Amendments to IFRIC14 'IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'.

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

For management and internal reporting purposes the group is organised geographically into three regional divisions; the South, the North and Scotland, and an internal property division reporting to the Chief Executive, 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 acquisition expenses, amortisation of intangible assets, goodwill impairment, long-term employee benefit costs arising from acquisitions, additional purchase consideration, restructuring costs, and net profits or losses arising from property disposals. All assets and liabilities of the group have been allocated to segments apart from the retirement benefit obligation, and tax assets and liabilities. 

With effect from 1st January 2012 the management of the Kimbolton and Kings Lynn offices has been transferred to the South division. Previously these operations were reported as part of the North division.  Comparative information has been restated.

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:

Note 3 - Taxation

Note 4 - Earnings per share

A. 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.

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 two categories of dilutive potential ordinary shares: share options granted under the Savings Related Share Option Scheme and conditional share awards granted under the Equity Incentive Plan.  Options granted under the Equity Incentive Plan are considered to be non-dilutive. 

For the share options, a calculation is done 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.

C. Underlying earnings per share

Underlying earnings per share represents profit for the year from continuing operations adjusted for goodwill impairment, amortisation of intangible assets, acquisition expenses, long-term employee benefit expenses arising from acquisitions, restructuring costs, equity settled share based payment expense and net profits on the disposal of property assets 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

Note 5 - Dividends

The directors are proposing a final dividend of 2.00 p (2011: 2.00 p) per ordinary share totalling £828,000 (2011: £828,000). Subject to approval at the annual general meeting, the final dividend will be paid on 17th May 2013 to shareholders on the register as at 19th April 2013. The shares will go ex-dividend on 17th April 2013.  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 2012 final payment, may do so by contacting Capita Registrars on 0871 664 0300 (Lines are open 8:30am - 5:30pm Mon-Fri. Calls cost 10p a minute plus network charges). The last day for election for the final dividend reinvestment is 25th April 2013 and any requests should be made in good time ahead of that date.

Note 6 - 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:

Note 7 - Notes to the statement of cash flows

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:

Note 8 - Related party transactions

The remuneration of the directors of the company was £868,000 (2011:£813,000), including pension contributions of £91,000 (2011: £65,000). 

The remuneration of key management (including directors of subsidiary companies) was £4,728,000 (2011: £4,491,000), including termination payments of £212,000 (2011: £38,000).  Pension contributions in respect of key management (including subsidiary directors) were £435,000 (2011: £491,000) and other long term benefits included in the remuneration charge were £250,000 (2011:£375,000).  Sales of £nil (2011: £63,000) were made to key management of which £nil (2011: £12,000) was outstanding at 31st December and was settled after the year end.

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 9 - Subsequent events

There are no events subsequent to the reporting date which require disclosure in the financial statements.

Note 10 - Annual General Meeting

The 101st Annual General Meeting will be held at The Riverside Room, Savoy Place, 2 Savoy Place, London WC2R 0BL on Friday 10th May 2013 at 12 noon.

Statement of directors' responsibilities in respect of the financial information

We confirm that to the best of our knowledge:

(a)  the financial information, prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, gives a true and fair view of the assets, liabilities and financial position and profit of the group; and

(b)  the business and financial review includes a fair review of the development and performance of the business and the position of the group, together with a description of its principal risks and uncertainties.

On behalf of the board

Russell RaceChairman

Mark Lawrence Chief Executive

Martin Walton Finance Director

19th March 2013