TCK-COVER-X-REPRO_TC 27/03/2015 20:41 Page 1
TClarke plc
45 Moorfields
London EC2Y 9AE
020 7997 7400
www.tclarke.co.uk
Building innovation
Building relationships
Building services
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Contents
Strategic report
02 Chairman’s statement
06 Chief Executive Officer’s review
10 Finance Director’s review
14 Our vision
16 Our strategy
20 Opportunities for growth
22 What we do - operating environment
24 What we do - our services
28 What we do - where we do it
30 Our governance structure
32 Internal controls and risk management
35 What did we achieve?
54 Key performance indicators
Directors’ report
58 The Board
59 Shareholder information
and company advisors
60 Corporate governance report
65 Audit Committee report
67 Nominations Committee report
68 Remuneration Committee report
80 Other disclosures
82 Directors’ responsibilities statement
Financial statements
83 Independent auditors’ report
90 Consolidated income statement
90 Consolidated statement
of comprehensive income
91 Consolidated statement
of financial position
92 Company statement of financial position
93 Consolidated statement of cash flows
93 Company statement of cash flows
94 Consolidated statement
of changes in equity
95 Company statement of changes in equity
96 Notes to the financial statements
Additional information
144 Address book
TCK-REPORT-pages 1-60 REPRO-X_Layout 1 27/03/2015 20:49 Page 1
TClarke - at a glance
Revenue
Forward order book
£227.5m
£300m
Underlying operating profit*
£1.4m
Loss before tax
Dividend per share
Loss per share
Net cash
(£0.7m)
3.10p
(1.58p)
£5.3m
* Underlying profit is profit from continuing operations, adjusted for amortisation of intangible assets and non-recurring costs
1
Annual Report & financial statements 2014
TCK-REPORT-pages 1-60 REPRO-X_Layout 1 27/03/2015 20:49 Page 2
Strategic report
Chairman’s statement
Reflecting on 2014
The business has done much more than withstand challenges; in
2014 TClarke emerged in good shape to take advantage of slowly
improving conditions. Over the last year, as in the previous five
years of the recession, resilience and financial discipline have
been matched by an ability, at senior level, to plan and execute
change and efficiency programmes, and at the frontline level to
deliver for our clients. In this my first year, I have been involved
straight away and seen what makes TClarke tick, close up.
2014 saw the beginning of a long-overdue recovery
in our markets, with revenue increasing by 4.8% to
£227.5m (2013: £217.1m) and net cash improving to
£5.3m (2013: £1.0m), with £5m cash generated by
operations (2013: £2.6m cash outflow from operations).
The emergence and resolution of two challenging issues,
one a damages claim relating to a pre-acquisition contract
at a subsidiary, and the other a protracted final account
settlement in our Mission Critical division, coincided with
my arrival as Chairman, and it is right to record that
these did cause us all - me included - some sleepless
nights. The nature of construction is such that these kinds
of issues do emerge from time to time - in TClarke’s case
they are rare. But they did have the effect of stress-
testing the company’s systems and procedures with a
new Chairman onboard.
Both issues were resolved during 2014, resulting in an
underlying operating profit of £1.4m (2013: £3.2m) and
a statutory loss before tax of £0.7m (2013 profit: £1.7m).
However, if you set their costs aside and look at the
overall performance of the group, then it was a successful
year. In the second half of the year, you could say ‘the
decks were cleared for action’ - and we saw action in the
shape of a series of significant contract wins in London
and also, though less widely reported at the time, across
the UK.
2014 showed that the company is highly effective in
winning contracts, negotiating them prudently and
delivering them to high standards - in the face of markets
showing very little sign of major improvement. But if
recovery of UK construction was slow, then it is worth
noting three things: Firstly, this was precisely in line with
TClarke’s forecast, secondly that in 2014 TClarke again
won more than its fair share of the work open to it, and
thirdly that at the close of the year we are able to look
back at key progress, made against a clear strategic plan,
that has steadily built a strong platform to take the
business forward in 2015 and beyond.
Joining the firm - early impressions
During 2014 I have been fortunate to make a number
of visits, across the regional operations and also across
London, meeting apprentices and staff and also visiting
a number of TClarke projects. It has been extremely
valuable in helping to understand what the TClarke name
stands for, inside the firm and in the marketplace. From
these first experiences, a few things are worth noting in
this report.
Culture of leadership
Firstly, there is a very clear culture of leadership - not
just at board but at every single level on every scale of
project - and this is something my predecessor Russell
Race remarked upon too. Quality in construction and the
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Annual Report & financial statements 2014
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Strategic report - Chairman’s statement
David Henderson
Chairman
24th March 2015
wider engineering sector depends upon the skills, culture
and motivation of leaders at every level in the organisation
- on individuals being switched on and taking a pride
in details, day in day out. This culture was on show
everywhere; in details of safety procedure, in the quiet
clarity of plans and briefing, and in the attitude to serving
clients and the plain pride in doing a good job that
frontline people so clearly took. This is a company where
people take responsibility and take pride in the quality
of their contribution - and this happens quietly, without
show or fuss.
The commitment to apprenticeships
has strategic business value
Secondly, in 2014, as in every year since the recession
bit, TClarke kept on training and taking on apprentices.
These are impressive young men and women. A TClarke
apprenticeship is not just another apprenticeship - it is
something that young people really want and really work
for. There is competition for each one and the apprentices
that the company selects are high calibre, motivated and
with evident quality. This is enormously encouraging and
not just for TClarke; it is a genuine pleasure to see that
the British engineering and construction sectors can
attract these young people and offer them worthwhile
opportunities. Of course this is not mere altruism. The
hard commercial result of this long-term policy was also
evident toward the end of 2014 as TClarke’s resource of
high quality people became something that contractors
and clients were keen to lock into their projects for
the future. This desire is key to the generation of strong
value for shareholders going forward in the cycle. It
is not a complicated plan - but it does not happen by
chance. TClarke has the culture of training and offering
apprenticeships and it also has the structure and expertise
in-house to make this work. In many ways this is a model
of excellence for British engineering.
Efficiencies are paying off
Thirdly, the practical actions led by the executive board
to enhance efficiency across the group, to leverage
opportunities to share resource, to cross sell and upsell
services, to unify and simplify back offices and so make
it economically viable to enter new markets quickly and
cheaply - these actions in 2014 began to get results. While
some in the construction sector were just hanging on and
others were, sadly, failing to do even that, TClarke was
extremely busy preparing itself. This is not a standstill
company - this is a company that drives change through
the industry - changes in best practice and ways of
working that will keep it at the forefront of the sector.
3
Annual Report & financial statements 2014
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Strategic report - Chairman’s statement
Thanks to our people, our
business partners and our customers
I should like to extend my thanks to the TClarke people
who make this business what it is - our staff, our
business partners and our customers. In an era of
increasingly sophisticated and carefully presented
marketing, when ‘brands’ are manicured and manipulated
to increase their appeal, TClarke stands for something
straightforward, tangible and valuable. The TClarke
culture is built by decent and highly professional people,
forging open and collaborative relationships with their
suppliers and customers. The TClarke brand is about
always delivering and ‘never letting down’ - and that is
not a motto in the boardroom - it is an attitude and a
pride that people have in their work. In my first year
here, I have been able to see that this is a real brand
- a real promise that is delivered by our people and
owned by them.
There is a sense of privilege in being involved on the
inside of such an organisation - and pride in what is a
longstanding and unsung but nonetheless extremely
compelling British engineering success story. In thanking
our shareholders for their continued support and interest
throughout another year of challenging market conditions,
I do hope that as well as looking for long-term value,
they will also share my pride in being part of TClarke.
Outlook
Looking ahead to 2015, knowing that the industry,
media and trade bodies are already predicting major
skills shortages in the short and medium term, the power
and direct business value of the TClarke resource of
skilled and motivated people is evidently a key strategic
advantage.
And there is another strategic advantage which is likely
to gain prominence and create value during 2015 and
that is the balancing of powerful electrical contracting
capability in the London market with a similarly high
quality, large-scale mechanical engineering offering.
DGR was bought in 2010 and this excellent mechanical
business has forged ahead. During 2014 the TClarke
Group announced that the time was right for DGR to
rebrand to TClarke, to play an increasingly central and
integrated role in the group, bidding for and winning
combined M&E packages. This strategic shift was
matched by a structural one with Danny Robson, DGR’s
founder and MD, taking up an executive post on the main
group board of TClarke.
During 2015, the company will initiate further strategic
changes in structure, all of which will be designed to help
the business to maximise the value - both long and short
term - which we can generate from the upcycle.
With a record order book and early signs of margins
beginning to improve we look forward to 2015 and
beyond with renewed confidence.
David Henderson
Chairman
24th March 2015
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Annual Report & financial statements 2014
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Strategic report - Chairman’s statement
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Annual Report & financial statements 2014
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Strategic report
Chief Executive Officer’s review
Reflections on 2014
From a headline point of view, 2014 was a year ‘of two halves’ for
TClarke; the first half clouded by two ongoing contractual issues
and the weakness of the recovery and the second half marked by
a series of major contract wins (and the resolution of those issues).
Beneath the headlines though, this organisation was focused and
working hard - to build the order book and to set itself in a strong
position for the upturn.
The UK economy as a whole saw many signs of
substantial recovery in 2014 but in the construction
sector, any such signs remained sparse until late in the
year. Even though there was widespread confidence and
belief in the certainty of recovery in the short term, this
was not translated into any significant surge in demand.
So margins remained under pressure and our pleasure at
setting and beating records for the size of our forward
order book throughout the year would be tempered by
the fact that margin pressures had not eased. It was only
in the final quarter of 2014 that the market shifted from
ultra-cost competitive to resource-focused (with resultant
better margins).
In previous years we have reported on the projects we
have undertaken internally to improve our efficiency,
market proposition, exposure to growth opportunities and
ability to leverage all of our resources. In any sector the
ability to change what you do, ahead of opportunities, is
critical to growth and value creation. Now after five years
of reporting on how the company has riden the storm and
invested its energies in change for value creation, it is
worth considering what we have achieved in that time.
How we performed in 2014
Our strategy throughout the recession has been to
scrutinise our current and potential market places
and decide how we can organise our resources and
propositions in order to maximise opportunities when
they appear, without over-exposing ourselves to any
single market. This strategy has the clear objective of
making our progress less dependent on the cyclical
behaviour of any specific sub-sector or local market within
construction.
So in 2014 it is very good to reflect on a year in which
we really did breakthrough in UK construction’s dominant
London market, as a full mechanical and electrical
contractor with a series of major M&E projects won and
delivered. This is strategically significant for TClarke; it
substantially increases our potential market place and the
introduction of Danny Robson onto the company’s main
board is a reflection of the way we view this opportunity.
Equally, through the downturn, our challenge has been to
improve our ability to move rapidly and at minimal cost,
into new market sectors where opportunities appear,
while at the same time being a substantial and genuine
‘top 5’ company in each of those sectors, with real
resource and quality appropriate to the TClarke brand.
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Annual Report & financial statements 2014
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Strategic report - Chief Executive Officer’s review
Mark Lawrence
Chief Executive Officer
24th March 2015
A selection of TClarke projects:
Contract
TClarke division
Contract
Nova Victoria
TClarke division
Mechanical & Electrical Contracting
20 Fenchurch Street
240 Blackfriars Road
Mechanical & Electrical Contracting
One Angel Court
Mechanical & Electrical Contracting
Mechanical & Electrical Contracting
Phoenix Park, Ravenscraig
Residential and Hotels
450 South Oak Way, Green Park
Mechanical & Electrical Contracting
Principal Place
Mechanical & Electrical Contracting
60 Victoria Embankment
Mechanical & Electrical Contracting
Rathbone Square
Mechanical & Electrical Contracting
Aberystwyth Student
Accommodation
Residential and Hotels
Rathbone Square
Riverwalk House
Intelligent Buildings
Mechanical & Electrical Contracting
ARK Putney Academy
Mechanical & Electrical Contracting
Romford ROC
Rail and Transport
Bank Station Capacity Upgrade
Rail and Transport
Selfridges
Mechanical & Electrical Contracting
BBC White City - Project Vesta
Mechanical & Electrical Contracting
Silwood Sidings
Rail and Transport
Bloomberg London
Mechanical & Electrical Contracting
South Bank Tower
Mechanical & Electrical Contracting
BP Sunbury - Building E
Mechanical & Electrical Contracting
Springfields Fuels
FM / Framework
British Energy
FM / Framework
St George - Fulham Reach
Residential and Hotels
C336 Paddington New Yard
Rail and Transport
Summit House
Mechanical & Electrical Contracting
De Vere Gardens, London
Residential and Hotels
Transforming Tate Modern
Mechanical & Electrical Contracting
Deutsche Bank - Project Haywood
Mechanical & Electrical Contracting
Trinity Park Phase 2, Edinburgh
Residential and Hotels
Dixons Allerton Academy
Mechanical & Electrical Contracting
US Air Force Bases
FM / Framework
Imperial Tobacco HQ, Bristol
Mechanical & Electrical Contracting
Mildenhall & Wyton
London Wall Place
Luminus Electrical
Mizuho Bank
Mechanical & Electrical Contracting
Victoria Station Upgrade
Rail and Transport
FM / Framework
Waitrose
Mechanical & Electrical Contracting
Mechanical & Electrical Contracting
Newquay Tretherras School
Intelligent Buildings
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Annual Report & financial statements 2014
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Strategic report - Chief Executive Officer’s review
Our vision is clear, purposeful
and unchanged
Our vision is to ‘achieve world class performance in the
quality of our work, the strength of our relationships and
the value we can create through innovation, for all our
stakeholders.’ During these years of challenging market
conditions, that vision has remained clear and central in
our thinking. At its core, this vision expresses our belief
in engineering excellence as the key to delivering real and
lasting value.
It is this clear focus that commits us to training young
people and in 2014 TClarke apprentices did more than
thrive, they won a series of local and national awards,
doing great credit to themselves and the company.
Our strategy positions us
for growth
As has been reported over the last years and again this
year, TClarke has weathered the storm well. Although
remaining cautious and prudent in our planning, we can
see clearly now that the market is increasingly less price-
driven and increasingly more resource-focused. In plain
terms, developers and principal contractors are looking to
secure and lock in high quality teams for their projects in
order to deliver them on time and on budget.
From a strategic perspective, TClarke now has the
opportunity to grow in all of its markets and to become,
during the years of upturn, a more significant player in a
range of specialist sectors and markets.
Our Transport, Residential, Design & Build, Facilities
Management and Mission Critical businesses were all
winning and delivering substantial new projects, and
we re-established a presence in the West Midlands
commercial market and strengthened our positions in
regional markets right across the country.
In 2014 we broke our forward order book record more
than once - and it ended at a very healthy £300 million.
We delivered what we had promised - organic growth,
structural efficiencies and an ongoing commitment to
delivering quality in our work.
We were innovators too in many areas. Our new ‘You See
You Say’ smartphone safety reporting app is a genuine
innovation and industry first, giving our operatives much
enhanced ability to report safety risks and incidents. We
have introduced it across our business and for our supply
chain and we’re delighted that others in the industry are
following our approach.
Our Transport Division was engaged in the ground-
breaking Innovative Contractor Engagement (“ICE”)
procurement approach at Bank underground station,
where the main contractor and its partners were actively
involved from the earliest stages in working with the
client to increase the end value achieved for users of the
station. This is a great example of real innovation,
transforming the way we collaborate with all parties.
What may not grab headlines, but is arguably more
important to emphasise, is that TClarke teams in London
and across the UK were delivering and collaborating on
some of the most challenging construction projects
anywhere - and this work, in 2014 as in every year - is
what keeps our people at the top of their game and
cements our reputation in an industry where you are only
ever as good as your last job.
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Annual Report & financial statements 2014
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Strategic report - Chief Executive Officer’s review
Whereas in 2008, our opportunities for growth were
largely confined to the London electrical contracts market
and to regional M&E work, we now have credible,
established and well resourced teams in London M&E,
Mission Critical, FM, residential, transport and design and
build sectors.
Whereas in 2008 we owned a regional network of
independently branded, highly reputable local M&E or
electrical contractors, in 2014 we have a fully integrated,
uniformly branded nationwide network of building services
operations, whose resources are capable of collaboration
to meet market opportunities.
To provide a clear example of how this works in just one
of the areas mentioned above: in 2014 we won a range
of major M&E projects in London such as Bank Station,
Romford Rail Operating Centre, Selfridges, Ark Academy,
Putney and Riverwalk House - these substantial contracts
simply would not have been open to TClarke in the past
since we lacked the integrated M&E offering and
reputation in the market.
In a steady and intelligent way our purpose, as the cycle
finally presents us with more buoyant markets, is to grow
the business, both in areas where we have foreseen
opportunities and in new areas that continue to present
themselves.
Our priorities for 2015
In 2015 our key priorities will - as in 2014 - be on safety,
on quality and on delivery of our strategy for growth.
Safety
It will remain our main priority - not just for our excellent
safety teams nationwide, but for every single individual.
We will continue to invest and innovate and we will play
our role fully in leading the industry and moving safety
standards forward. Above all we will work hard to avoid
complacency in any area. Safety will come first above any
other consideration.
Quality
The record order book is not simply composed of ‘bread
and butter’ work - it is in the main part comprised of large
scale, complex, fast track construction projects. It also
includes projects where highly innovative collaborative
approaches are being used and projects where technical
challenges are at the cutting edge - such that very few
firms in the market are seen to have the capability or
experience. In 2015 we will be focused on the quality of
our project delivery, our collaboration with partners and
the excellence of work delivered by teams and individuals.
Delivering our strategy for growth
In this statement I have already set out our growth focus;
in 2015 we will also be introducing a further set of
carefully planned strategic changes in our structure and
organisation and these will have the clear purpose of
further enhancing our ability to grow in the ways which
we believe will deliver best value.
Mark Lawrence
Chief Executive Officer
24th March 2015
9
Annual Report & financial statements 2014
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Strategic report
Finance Director’s review
Summary of Financial performance
2014
2013
Continuing operations
Revenue
Underlying operating profit
Intangibles amortisation
Non-recurring costs - Exceptional claim settlement costs
Operating profit
Net interest
(Loss) / profit before tax
Tax
(Loss) / profit for the year
(Loss) / earnings per share - basic
(Loss) / Earnings per share - continuing operations
Underlying earnings per share - basic
Underlying earnings per share - diluted
£m
227.5
1.4
(0.2)
(1.2)
–
(0.7)
(0.7)
0.1
(0.6)
(1.58)p
(1.58)p
1.06p
1.01p
£m
217.1
3.2
(0.3)
(0.6)
2.3
(0.6)
1.7
(0.6)
1.1
2.51p
2.43p
4.14p
4.00p
Underlying earnings per share is stated after adjusting for £0.3m (2013: £0.2m) tax on adjusting items.
Underlying group performance
Overview
Underlying operating profit fell to £1.4m (2013: £3.2m)
due to a substantial loss on the Mission Critical contract
highlighted in last year’s annual report. No major loss is
to be taken lightly; however, in this instance it was in the
group’s best interest to reach a negotiated settlement.
This contract has been fully settled and there is no
further cash out flow. This contract aside, TClarke
continued to perform well in tough market conditions,
with revenue increasing by 4.8% to £227.5m (2013:
£217.1m).
TClarke South
Revenue from our South operations was down 2.7% year
on year at £167.6m (2013: £172.2m). Competition has
remained fierce throughout the region, particularly in the
first half of the year with clients delaying procurement to
secure ever keener prices. This trend began to reverse
towards the end of the year, with many of the region’s
offices benefiting from repeat work through strong
relationships and clients beginning to realise that they
needed to lock in resource going forward. The last few
months of the year also saw significant wins for our
combined M&E business in London, securing significant
revenue into 2015 and beyond.
The region reported an operating loss of £2.2m (2013:
profit £0.5m). After adding back £1.1m (2013: £0.5m)
exceptional claim settlement costs (which are discussed
below), the underlying operating loss was £1.1m (2013:
profit: £1.0m). The fall in underlying operating profit
masks an encouraging performance from many of our
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Annual Report & financial statements 2014
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Strategic report - Finance Director’s review
Martin Walton
Finance Director
24th March 2015
offices - if you strip out the impact of the loss on the
Mission Critical project referred to above, the regions as
a whole would have delivered a significantly higher profit
than in 2013.
TClarke North
Revenue from our North operations increased by 38% to
£43.4m (2013: £31.4m), with the region benefitting from
strong client relationships and repeat business.
Operating profit was £1.4m (2013: £1.5m), representing
a profit margin of 3.2% (2013: 4.8%). Operating margins
were higher in 2013 due to positive final account
settlements on a number of contracts undertaken in
previous years. The underlying operating profit, before
£0.2m (2013: £0.3m) amortisation of other intangible
assets, was £1.6m (2013: £1.8m).
TClarke Scotland
Scotland’s revenue increased by 22% to £16.5m (2013:
£13.5m), with improving commercial and IT revenues
adding to its continuing strong performance in the
residential sector. Underlying profit improved to £0.6m
(2013: £0.2m), before deducting a further £0.1m (2013:
£0.1m) exceptional costs for successfully defending a
multitude of adjudication claims brought by a single
sub-contractor.
Revenue £m
m
5
2
m
0
5
m
5
7
0
m
0
0
1
m
5
2
1
m
0
5
1
m
5
7
1
m
0
0
2
Scotland
North
South
2014
2013
£16.5m
£13.5m
£43.4m
£31.4m
£167.6m
£172.2m
Underlying operating profit
m
5
.
1
-
m
0
.
1
-
m
5
.
0
-
m
5
.
0
m
0
.
1
m
5
.
1
0
Scotland
North
South
Property
Underlying operating profit margins %
0
0
.
1
-
0
0
.
1
0
0
.
2
0
0
.
3
0
0
.
4
0
0
.
5
0
Scotland
North
South
m 2014
0
2013
.
2
£0.6m
£0.2m
£1.6m
£1.8m
£(1.1)m
£1.0m
£0.3m
£0.2m
0 2014
0
2013
.
6
3.6%
1.5%
3.7%
5.7%
-0.7%
0.6%
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Strategic report - Finance Director’s review
Exceptional and non-underlying items
Exceptional and non-underlying items comprise £0.2m
(2013: £0.3m) amortisation of intangible assets and
£1.2m (2013: £0.6m) exceptional claim settlement costs.
Earnings per share
Basic loss per share was 1.58p (2013 - earnings: 2.51p),
and diluted loss per share was 1.58p (2013 - earnings:
2.43p).
The exceptional claim settlement costs represent a
continuation of the claims giving rise to costs incurred in
the previous year and are not expected to recur. These
include a £0.7m charge in full and final settlement of a
damages claim against one of the subsidiary companies in
relation to an incident that arose pre-acquisition, of which
£0.3m was paid in the year and £0.4m will be settled in
instalments over a period of three years, £0.4m (2013:
£0.5m) costs and interest in respect of a sub-contractor
claim against the group for work carried out in a previous
year, and £0.1m (2013: £0.1m) for costs incurred in
successfully defending a succession of adjudication claims
brought by a single sub-contractor in Scotland.
Finance costs
Net finance costs were £0.7m (2013: £0.6m), including a
£0.5m (2013: £0.5m) non-cash finance charge in respect
of the pension scheme. Net interest on bank loans and
overdrafts increased to £0.2m (2013: £0.1m), reflecting
increased use of our banking facilities during the year
prior to the settlement of the Mission Critical contract
referred to above.
Taxation
As a wholly UK based group, our tax charge is dependent
on UK corporation tax rates. Our cost base includes a
hard core of expenditure that is not deductible for tax
purposes, which has the effect of pushing up our effective
tax rate during periods of low profits (or reducing the
effective rate on losses). For 2014, the effective tax rate
on the reported loss was 11.3% (2013: 36.9% on
reported profit), with the effective tax rate in 2013 having
been impacted by the effect of falling corporation tax
rates on deferred tax assets brought forward.
Basic underlying earnings per share after adjusting
for amortisation of intangible assets and non-recurring
exceptional claim settlement costs and the tax effect of
these items, were 1.06p (2013: 4.14p), and diluted
underlying earnings per share were 1.01p (2013: 4.00p).
Dividends
The Board is proposing a final dividend of 2.60p (2013:
2.10p), leaving the total dividend for the year unchanged
at 3.10p (2013: 3.10p). The dividend is uncovered by
underlying earnings due to the impact of the Mission
Critical contract settlement referred to above - were it
not for the loss recognised on this contract, the dividend
would have been covered 2.2 times by underlying
earnings.
The final dividend will be paid, subject to shareholder
approval, on 15th May 2015 to those shareholders on
the register at 17th April 2015. The dividend will go ex-
dividend on 16th April 2015. A dividend reinvestment plan
(DRIP) is available to shareholders.
Cash flow and funding
The group has in place a committed £5.0m revolving
credit facility until 31st March 2017 and an £8.0m
overdraft facility, renewable annually. Interest on
overdrawn balances is charged at 2.75% above base rate,
and interest on balances drawn down under the revolving
credit facility is charged at 3% above LIBOR, fixed for the
duration of each drawdown (typically three to six
months). The group was compliant with the terms of the
facilities at 31st December 2014 and the board’s detailed
projections demonstrate that the group will continue to
meet its obligations in the future. Details of actual and
potential covenant breaches during the year are disclosed
in Note 21 to the financial statements and in the
corporate governance report on page 64.
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Strategic report - Finance Director’s review
The group’s net cash balances improved to £5.3m at 31st
December 2014 (2013: £1.0m) after deducting the £5.0m
(2013: £nil) outstanding under the revolving credit facility.
Cash inflow generated by operating activities was £5.0m
(2013 - outflow: £2.6m), reflecting a strong emphasis on
working capital management and the resolution of the
Mission Critical contract referred to above.
Net assets and capital structure
The group is funded by equity capital, retained reserves
and bank loans, and there are no plans to change this
structure.
At £23.2m (2013: £23.4m), goodwill and intangible assets
arising on previous acquisitions represent a significant
proportion of the group’s total assets of £103.2m (2013:
£88.5m). The board has undertaken a rigorous impairment
review in respect of the intangible assets at 31st
December 2014 and concluded that no impairment is
necessary. Details of the impairment review are given in
note 11 to the financial statements.
Pension obligations
The last triennial valuation of the pension scheme as at
31st December 2012 showed a deficit of £11.5m, which
represents a funding level of 68%. The group has put in
place a deficit reduction plan to eliminate the deficit over
a number of years, with total employer contributions rising
from 18% of pensionable salary for the year ended 31st
December 2014 to 20.7% for 2015 and 2016, 21.7% for
2017 through 2019, and 22.7% thereafter. Employer
contributions amount to approximately £1.1m per annum.
The group has provided security to the pension scheme
in the form of a charge over property assets up to a
combined market value of £3.1m.
In accordance with IAS 19 ‘Employee Benefits’, an
actuarial loss of £5.3m has been recognised in the
financial statements, with the pension scheme deficit
increasing by £5.4m to £16.3m (2013: £10.9m). The
significant increase in the deficit reflects the exceptionally
low discount rates (based on bond yields) which have
arisen due to macroeconomic factors beyond the
company’s control. The group continues to meet its
ongoing obligations to the pension scheme, but has now
taken action to close the scheme to new members and
is introducing a new defined contribution group personal
pension plan for staff not already in the defined benefit
pension scheme.
Accounting policies
The group’s accounting policies are consistent with the
accounting policies applied in previous years.
Group structure
Since recession hit the sector in 2009 we have undertaken
a number of initiatives to strengthen the effectiveness
and efficiency of the group’s operations. Further changes
planned for 2015 will see the rationalisation of the group’s
subsidiary companies into a single operating entity, a
natural progression from the changes we have already
made. We are also implementing changes to the group’s
internal management structure, which will see the
dominant South region split into two regions, comprising
London and the South East, and a Central and West
region.
Martin Walton
Finance Director and Company Secretary
24th March 2015
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Strategic report - Our vision
Our vision
TClarke aims to be a strong, successful and highly capable building services
contractor, organised to create and take advantage of market opportunities for
profitable growth across the construction industry; retaining TClarke’s traditional
focus on delivery of high quality work, by highly-motivated and expert teams,
sustaining long-term relationships and unlocking new streams of innovation to
create value for all our shareholders
Our strategy
Our strategy is to sustain world class building services capability and build a
‘growth-ready’ platform capable of exploiting existing and fast-changing
opportunities for value creation - page 16
Deliver complete,
high quality,
nationwide building
services
Build a
‘growth-ready’
unified business
platform
Retain and
enhance our
established brand
advantages
Focus on
innovation and
relationships
Drive
opportunities
for sustainable
growth
What we do
TClarke is a nationwide building services contractor. We provide high quality work,
innovation and project delivery, with the reassurance of our trusted brand and we
create high quality engineering jobs and opportunities for our people
Operating
environment
page 22
Our services
page 24
Where we do it
page 28
Managing our operations
TClarke has earned a strong reputation for performance, sensible risk
management and sound management over many years, which it is our objective
to retain and enhance
Our board
page 31
Our governance
structure
page 30
Internal control
and risk
management
page 32
Aligning executive
remuneration to
strategy
page 31
What did we achieve?
During 2014, our people worked with partners and suppliers to deliver a great
variety of construction projects; our business as a whole created and sustained
skills and jobs, and value for our shareholders. We also shaped our business for
future growth - page 35
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Strategic report
Our vision
TClarke aims to be a strong, successful and highly capable building
services contractor, organised to create and take advantage of
market opportunities for profitable growth across the construction
industry; retaining TClarke’s traditional focus on delivery of high
quality work, by highly-motivated and expert teams, sustaining
long-term relationships and unlocking new streams of innovation
to create value for all our shareholders.
Last year we introduced this statement of our
vision and it remains a clear statement of our goal.
The construction industry, as it emerges fully from
recession, remains competitive, price-focused and
reputation-driven. At the same time it is also dynamic
with new technologies and ways of working sweeping
through every stage of the process, transforming the
whole concept of constructing and maintaining a building
throughout its entire lifecycle. All of this change is
transforming cost models, working practices and
opportunities to create value.
Our vision is of a ‘building services contractor, organised
to create and take advantage of market opportunities
for profitable growth…’ This expresses our strategic
understanding that we must organise and develop our
set of skills and expertise intelligently in order to maximise
growth opportunities - that we must be a dynamic
business.
Our vision also speaks of our ‘traditional focus on delivery
of high quality work, by highly-motivated and expert
teams…’ and this signals the fact that although we must
be dynamic in our approach to opportunities, we also
want to keep and enhance the values and commitment
to our people that have stood us in such good stead over
the years.
Finally our vision speaks of ‘relationships’ and ‘streams
of innovation’. Going forward, our belief, across all the
specialist sectors in which we work, is that in the next
decade, the most forward looking, successful and
innovative building services contractors will be those who
develop the most effective and innovative relationships
with main contractors, developers and clients;
relationships in which all parties work with ever greater
focus on shared goals and new ways to understand and
create value.
Our vision is firmly based in the
realities of our business today
TClarke’s vision expresses our long held belief in a clear
chain of factors creating value for stakeholders. We
believe that if you invest in the best people, they will
deliver the best work and this will build the best reputation
and that will allow you to merit and achieve the best deals
when negotiating contracts.
2014 has shown this vision to be as relevant and accurate
as ever.
TClarke teams deliver, because the levels of motivation,
commitment and sheer engineering excellence are high.
This is the heart of our culture and reputation going back
through our history. From this solid foundation we have
built exceptional client relationships and we see quality
relationships as the key to the creation of long-term
sustainable growth and value for all our stakeholders.
Going forward we believe we can forge new relationships
with our partners, clients and suppliers - relationships
that are strong and deep enough to allow us all to work
together in the ways that will unlock new ways of working,
thinking, collaborating and engineering solutions.
This combination of quality work, sound relationships
and dynamic innovation will allow us to build exceptional
value and growth opportunities across new and traditional
sectors of our industry - for our shareholders, for our
people and also for our partners.
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Strategic report
Our strategy
Sustain world class building services capability and build
a ‘growth-ready’ platform capable of exploiting changing
opportunities for value creation.
Our strategy is our high-level plan to help us achieve our
goal or vision. For more than 125 years, TClarke has
sustained world class capability in its chosen field.
One of the most recent comprehensive analyses of the
construction sector was released in July 2013 by the UK
Government’s Department for Innovation and Skills -
‘UK Construction: An Economic Analysis of the Sector’.
The report identified the following four factors as Drivers
of long-term growth:
1. Deliver complete, high quality,
nationwide building services
capability
At any time, TClarke needs to ensure that it has the
market capability, credentials and resource necessary to
compete for and win the most attractive contracts. So a
key part of our ongoing strategy is to keep refining and
advancing the scope of our offer, in line with changes in
the market.
People and skills
Access to finance
Innovation capability
Supply chain development
It is fair to say that TClarke scores very highly in all of
these key areas and that our strategies and long term
behaviour are clear to see - both in action and outcome.
In 2014, we undertook a whole range of actions and won
a number of key contracts which all served to move us
ahead strategically, sustaining and developing our
capabilities in many specialist areas of Building Services.
In 2014 it was also possible to see how much had been
achieved by the company during the downturn.
Total integration of our mechanical operation
In 2014, the stand-out strategic development in this area
was the complete integration of our TClarke DGR large
scale mechanical operation with our main business. DGR
had been part of the group for four successful years and
in 2014, the integration was completed. This was
matched by a series of major M&E contract wins and the
appointment of TClarke DGR’s MD and founder Danny
Robson to the main Group board.
This single action massively increases the potential
market for TClarke Group’s services by opening up the
large scale M&E contracts in London and UK markets.
Constant review, development and upgrading
of our offer
As the organisation has developed over recent years, we
have constantly identified new specialisms and areas of
expertise where we saw either potential for new revenue
streams or areas in which we would need to develop high
quality skills in order to retain our leadership position in
our markets - sometimes both.
So for example we developed an in house Intelligent
Buildings capability allowing us to develop and offer high
quality ICT skills that were increasingly intrinsic to all
building services projects and bid packages. In the same
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Strategic report - Our strategy
way we developed substantial green technologies
expertise and introduced our Mission Critical team of high
quality engineers to work on the most challenging ‘mission
critical’ projects including data centres. In each case, we
have looked ahead at upcoming trends and market
requirements and worked to develop our capability in a
way that fits our brand offer. In most cases, we were able
to develop these services organically and build a new
revenue stream from our existing resources.
Design & Build operation launches strongly in 2014
In last year’s annual report we announced the upcoming
introduction of a new TClarke Design & Build operation.
We planned this strategic move because we saw a
potential new revenue stream and we also saw an area
featuring high value, high quality services, innovative
thinking and deeper client relationships - these features
made it strategically attractive and appropriate to us. In
2014, our design and build business has gone from a
standing start to an £11m order book and a high quality
operation that’s slightly ahead of its planned growth
target.
Transport and Residential take next steps forward
In 2014 we also saw substantial advances for our
specialist Transport and Residential divisions. To develop a
resource and reputation in these specialist areas takes a
few years. But once you have established a reputation in
the market, then growth can accelerate. Although our
markets had not yet recovered in 2014, we saw valuable
growth in both of these specialist businesses.
2. Build a ‘growth-ready’ platform
Progress in our stage by stage rationalisation
programme
The business has been involved in a stage by stage
rationalisation programme, which in recent years has
concentrated on integrating and rationalising the back of
house, finance, IT, business systems and administration
across the whole group. The purpose has been to create
a nationwide operation that is integrated and aligned and
therefore capable of taking growth opportunities.
In 2014 we saw significant operational results across the
board - particularly in our growing ability to leverage
resources and skills from across the group. A series of
high end residential developments in London and the
South East have integrated London based electrical teams
with TClarke Scotland’s intelligent buildings resource.
Similarly a major M&E contract was pitched, won and
delivered by TClarke Bristol working in partnership with
TClarke DGR.
Preparation for move in 2015 to new structure
In 2014 we also saw considerable planning work on the
next stage of our rationalisation - the project to bring all
of our local businesses together within one UK operating
company and in four new regional operations. This
structure aims to keep the valuable local presences and
connections into local markets which we currently enjoy,
but also to maximise our efficiency, capability to cross sell
and share resources and knowledge both regionally and
nationally.
There is considerable work to do, from a contractual point
of view and we envisage that this project will be complete
with the new set up in place by the end of 2015.
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Strategic report - Our strategy
3. Retain and enhance our
classic brand advantages
The TClarke brand is built upon the quality of our work
and reliability of our delivery, whatever the challenges.
This in turn is dependent upon the quality of our teams -
so it is of strategic importance that we do everything we
can to retain and enhance our brand. In plain terms, if
we want a strong brand, we need to support and develop
our people.
Where many companies talk in these terms, TClarke is
especially focused on adhering to this principle.
TClarke has a directly employed and highly skilled
resource - not just of site teams but also in every layer of
management and in the experienced engineers who
design, lead and deliver projects. TClarke provides career
paths that can and do lead from apprenticeships to senior
management - not just occasionally but regularly. TClarke
is known for quality of delivery and high levels of expertise
- particularly for the most critical or challenging jobs.
Staying true to our belief in apprenticeships
Throughout the downturn TClarke has not only retained
but carried on building that resource, bringing new
apprentices through the organisation, and bringing in
new specialists to deepen our capability.
In 2014, TClarke had over 100 apprentices on the books
across the business. Due to the high demand for our
apprenticeships, we are able to select highly capable and
motivated people. TClarke also offer training opportunities
for high quality adult candidates - and in 2014 successful
adult trainees were offered full time jobs with the firm. In
2014 several of our apprentices across the UK won
external competitions and awards.
Growth based on brand reputation - Wales
In the last three and a half years, TClarke in Wales has
been able to build from zero to a major presence as a
building services contractor and, towards the end of 2014,
to win client awards for quality of work delivered. This
success underlines the power of the TClarke brand
reputation in helping create the opportunities to win work.
Our Cardiff team is one example of several across the
group where we are leveraging our brand reputation to
create fresh growth.
4. Focus on innovation
and relationships
ICE procurement at Bank Station
There is a clear and growing correlation between the
innovation you can deliver and the depth and quality of
relationships you can achieve. In 2014 TClarke redrafted
its brand line ‘Building Innovation, Building Relationships,
Building Services’ to underline this truth because it is
central to our philosophy for growth.
In 2014, TClarke’s Transport team began work on the
Bank Station Upgrade project working with London
Underground and principal contractor Dragados. The
project was procured using the highly innovative “ICE”
(Innovative Contractor Engagement) method where the
client assesses each bid on the added value of their
proposal rather than the lowest cost. Bidders were also
rewarded for their ideas in the bid - even if they were
unsuccessful. This win was highly significant for TClarke -
not just in the Transport field but in the wider arena - in
building our experience of how to handle and win these
opportunities.
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Strategic report - Our strategy
5. Drive opportunities for
sustainable growth
The construction sector is both cyclical and dynamic and
we therefore keep developing and reviewing our market
proposition and the areas and opportunities we should
target. Our purpose is not only to find the best path to
sustainable growth, it is also to make sure we have the
best balance of work in different sectors.
So, for example, in sectors such as residential, where in
2014 some competitors found themselves over exposed,
TClarke’s strategy is to select and negotiate opportunities
with care. Our resources are valuable and we work hard to
get the best return where we invest them.
Design & Build service launches with
‘relationship-based’ manifesto
In spring 2014, TClarke announced the launch of its new
Design & Build division. In December 2014, that business
was ahead of plan with a full order book worth £11m.
To achieve this success TClarke brought in a high quality
team, with substantial market reputation. This team,
led by Paul Barnes, presented a very clear and strong
‘relationship-based’ market proposition, offering an
exceptionally proactive approach to collaboration as the
key to unlocking more value at all stages of the design
and construction process.
Mission Critical team keeps building its reputation
Most of the projects our Mission Critical team undertakes
for major clients - particularly in the financial sector - must
remain confidential. However, we are able to say that
during 2014, TClarke’s Mission Critical engineers delivered
a number of major and highly complex projects
successfully - frequently dealing with challenges that were
entirely new or which pushed the boundaries of previous
best practice forwards. Our constant involvement through
this team in the most technically challenging and
necessarily innovative projects in the industry is of major
importance to our continued leadership position.
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Strategic report - Our strategy
Opportunities for growth
Market
segment
Very
large-scale
electrical
Very
large-scale
mechanical
Major scale
combined
M&E
For the large-scale construction projects in the UK, which are often
focused around the London region, the electrical contract and the
mechanical contract - which may each be worth upwards of £10m - are
generally tendered separately and this is because it usually makes best
sense at this scale for the principal contractor / client to split the risk
between two suppliers.
How this
segment
operates
Major projects where the
combined value of the M&E
components are roughly £10-
15m or less are usually offered
for tender as combined M&E
contracts. Increasingly, to work
the risks better for themselves,
clients and contractors will look
for one stop shops in this scale
of project where not only M&E
but the full service, including
design and build, ICT, green
technologies and FM can all be
offered by one building services
contractor.
We have always had a major
presence in this market,
undertaking several such
projects per year.
In 2014 as in previous years,
we won rather more than our
share of available work and in
the final quarter, won a series
of the most notable jobs
available.
Current
situation
in 2014, the full integration of
TClarke DGR into the group
operation was achieved and
among notable wins, we began
delivery on one of the largest
mechanical prefabrication
projects in the UK.
In 2014, alongside the full
integration of TClarke DGR
within the business, we
achieved breakthrough wins in
this market, winning a series of
larger M&E jobs in London and
the South East.
TClarke remains as
market leader in this sector with
a premium brand and reputation
for delivery.
In 2014 margins remained tight
but going forward it is sensibly
expected that better margins
will be available and as clients
seek to lock in our resources, as
skills shortages loom, there will
be good opportunities for value
creation.
2014 was our breakthrough
year in this market with a series
of major contract wins.
TClarke DGR is already
recognised in the industry as
one of the few sub contractors
with the record, resource and
skill to deliver the largest and
most challenging fast track
projects.
In the short,medium and long
term this area of our business
has the potential for good
growth.
As the TClarke group has
integrated its mechanical offer
fully, 2015 will be the first full
year in which our sales and
marketing operations are fully
able to promote this proposition.
In support of that 2014 also
gave us a number of good scale
projects to present as proof of
capability.
There are significant
opportunities for growth in
this area.
Potential
for
growth
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Strategic report - Our strategy
Specialist
growth
sectors
Up-sell
growth
services
the
Regional
M&E
Specialist sectors require
specific skills, experience and
accreditations. These sectors
offer strong opportunities
for a player with high quality
resources to enter and offer
winning combinations of quality,
value, delivery track record
and risk profile.
Very strong performance from
our Transport and Residential
businesses were complemented
in 2014 by our new Design &
Build operation.
Construction is transforming
- change is being driven by
technology, particularly IT,
by customer demand for green
and sustainable buildings, by
legislation, by industry demand
for speed and cost reduction
leading to innovative working
and manufacturing practices.
TClarke has made key strategic
moves to stay ahead in all of
these areas and develop
services that the market wants.
Beyond London there are local
markets for building services,
including the full range of
specialisms the group offers. In
order to be a significant player
in regional markets it is highly
beneficial to have a genuine
local presence - this
is particularly critical in public
sector work. For major scale
projects, it is helpful and
necessary to be able to call on
wider specialist group resources
- both to tender for and to
deliver work.
We have invested steadily in
building capability in these
areas. Our Green technologies,
ICT skills, Manufacturing skills
and FM services are all strong
and established areas for us.
In 2014 we added a design and
build operation based in the
South East and we added to our
new skills in Building
information modelling.
TClarke’s substantial regional
network of businesses has
longstanding local client bases.
In 2014 the back office and
systems rationalisation
programme across these
business was completed and
cross-selling, up-selling, joint
bidding and shared resourcing
became regular features of
operational behaviour.
HS2 and other major rail and air
transport projects offer further
opportunities for the growth of
our transport business.
Our residential business, led by
Scotland has a strong reputation
and we are able to choose large
scale opportunities where we
see value.
Our Design & Build operation
has the potential to continue
the growth achieved in 2014.
We will always review the
industry to seek relevant new
areas of opportunity.
As building services become
rapidly more complex and
technically challenging, TClarke’s
high-end skills, depth and scale
of resource and our experience,
give us opportunities to grow
and out compete competitors
who lack our resources in areas
such as green technologies,
ICT, design and build, building
information modelling and
prefabrication.
Our expertise and resource
allows us to move ‘up the value
chain’ where we can find better
margins and worthwhile growth.
In 2015 TClarke’s regional
restructuring, into four cohesive
units, will allow us to identify,
bid for and win a wider number
of the larger building services
and M&E projects throughout
the United Kingdom.
Regional markets are expected
to recover more slowly than
London markets.
TClarke’s regional restructuring
strategy is timed to deliver a
greater ability to win work at
the same time as an upsurge in
demand emerges.
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Strategic report
What we do operating environment
Our operations are substantially influenced by the economic
confidence and activity in our customer base, which includes direct
clients of every size across the country and principal contractors
within the construction sector. We shape our decision making in
order to manage risks effectively and take worthwhile opportunities
to deliver value for the benefit of our customers, shareholders, staff
and other stakeholders.
Construction sector cycle
Growth in the wider UK economy was not matched in the
construction sector until the very end of 2014. TClarke
has been consistent in pointing to the latter part of 2015
as the time in which recovery in the construction sector
feeds into better margins and growth opportunities for
our business. It is worth noting that alongside significant
concerns regarding skills shortages being reported across
the UK national press at the end of 2014 and start of
2015, there has also been widely expressed concerns
that the recovery in our sector may falter and stutter.
Our business has been successful in building its order
book which stood at £300 million at the close of 2014.
Changes in competitor landscape
In 2014 a number of significant construction sector
company failures or problems were widely reported in
the sector media and these highlighted the continued
recessionary pressures on the industry and the extreme
pressure on margins, with many companies making
non-economic bids on projects in order to keep cash
flow going.
As in previous years, we have been aware of new
competitors coming into our markets. We have worked
to ensure that our infrastructure of in-house resource,
logistics and supply chain relationships and quality of
expertise, clearly differentiates us from our competitors.
There are significant signs that the London commercial
market is picking up with contractors looking to build their
major schemes now and also to lock in the necessary
resources in order to mitigate the risks around project
delivery.
Going into 2015 we ourselves expect to effect one
significant change on the competitive landscape of the
building services sector, as our combined M&E and large
scale mechanical offerings provide our markets with
powerful and attractive new options.
In the normal cycle, we fully expect that regional markets
will pick up a little later than the London market.
There are a series of major transport projects such as
HS2 and various airport projects which will offer
additional opportunities for us going forward. However,
regardless of the outcome of the UK general election,
there is no certainty that nuclear and other power
infrastructure projects will emerge in the short term.
In 2015 we expect to leverage our brand advantages and
resources to affect the competitor landscape where the
focus will increasingly be on high quality resources, within
a wider picture of skills shortages.
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Strategic report - What we do, operating environment
We also believe that a steady stream of new technologies
will follow the path of Green technologies and ICT into the
mainstream of building services.
We believe that the thinking expressed in major
independent sector research documents such as the UK
Government’s 2013 Sector Analysis of Construction, is
aligned with our own and that we are well placed as
leaders.
Innovation and technology
TClarke has a strategic view on the key drivers of
innovation in our markets. We believe that innovation will
be linked in many cases to deeper and re-thought client
relationships and new ways to identify value. These newly
defined relationships will encourage all parties to build
things which deliver more of the specific benefits which
clients and increasingly the ultimate consumers enjoy.
Equally, as construction processes become necessarily
more complex, involving more technologies and faster
construction times, the whole task of understanding - in
purely practical terms - how best to save money, improve
designs, improve the ultimate user experience and
improve build times without compromising the drive
towards improved safety, will become necessarily more
difficult without the highest levels of expertise.
We take the strategic view that our steady improvement
in the quality, depth and range of our in-house resources,
building on existing levels of excellence and good attitudes
to collaboration, will allow TClarke to stay at the forefront
of innovative thinking.
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Strategic report
What we do our services
We manage and report our businesses by geographic segment, offering a range of services across a number of target
sectors. TClarke has the capability to flex and innovate across its service range with speed and success. In spring 2014
we added to our range of eight target areas a ninth - a new Design & Build operation. By the end of the year, this
operation had a full order book standing at £11m and had brought some powerful new clients to the group.
Equally, where it makes best sense in pursuit of our growth strategy we will rationalise our operations, exit a market or,
as is the case in Residential, limit our exposure by only bidding on contracts where we see specific levels of value
potential.
There is considerable overlap across these service offerings, but we have attempted to give you a flavour of what we
have to offer and the breadth and scale of our operations below.
Design & Build
True one stop in-house service
M&E Contracting
Our core business nationwide
TClarke now has a distinct and powerful in-house Design
and Build division based in Colchester. From its inception
at the start of 2014, this operation has been extremely
successful in targetting and winning a series of projects
from major contractors.
TClarke’s substantial in-house engineering resources have
always meant that we were able to deliver design and
build projects where opportunities arose. Our new Design
and Build operation, bringing in a very successful, cohesive
and highly experienced team, gives us the depth of
resource and focus which we like to have in-house in
order to deliver for our clients.
The team’s ‘relationship-driven’ philosophy has real
attraction for the series of specific market situations it
targets - and equally it is absolutely in line with our group
brand philosophy.
TClarke is a proven leader in M&E Contracting and in
2014, as has been reported extensively throughout this
report we integrated our world class TClarke DGR
mechanical operation fully with our London Electrical
operation. This integration on a brand and board
operational level has the intention of helping the group to
seek out and win a wide range of large scale mechanical
and combined M&E packages.
TClarke’s M&E contracting offer is also the bedrock of our
proposition in our regional businesses and in regional M&E
too, 2014 saw the steady emergence of collaboration and
resource sharing across the group at various levels with
the intention of allowing us to bid for and secure larger
projects.
M&E Contracting is the bedrock of our business and is
core to our strategic planning for the future.
Revenue 2014: £1m
Forward order book: £11m
Revenue 2014: £148m
Forward order book: £204m
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Strategic report - What we do, our services
Intelligent Buildings
High quality in-house ICT services
We integrate a number of building systems and solutions
to 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
also to secure stand-alone Intelligent Buildings contracts.
2014 was a strong year for our Intelligent Buildings team,
marked by highly successful intra-group collaborations
with our in-house Intelligent Buildings teams working for
some of our leading and most demanding London based
M&E teams and delivering to their very high standards.
The team introduced and won work with an innovative
Home Network product for residential developments and
underwent two successful audits from the Building
Research Establishment which commented on the quality
of our installations.
The steady growth of this team’s capability throughout the
recession has been of strategic importance in allowing the
TClarke Group to create further organic growth potential in
a way that doesn’t jeopardise our brand but adds a further
dimension to it. In the medium term, our opportunities in
this field will remain in some cases ‘stand alone’ and will in
others be one element within a complete building services
package.
Revenue 2014: £5m
Forward order book: £4m
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Strategic report - What we do, our services
Facilities Management
Residential, public sector and engineering FM
Transport
Our dedicated rail and airport division
Our facilities management business is about 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, schools and residential developments.
In particular, we have within the group truly world class
industrial FM operations, serving some of the biggest
names in UK engineering and the nuclear industry.
In 2014 the business performed strongly and in-line with
our expectations. As the group’s new regional structure
develops and our cross-sell capability expands during
2015, we see further opportunities for growth particularly
in the regions.
Revenue 2014: £19m
Forward order book: £18m
In 2014 our Transport Division was fully established as
a prominent, powerful and well resourced operation
within the group. The growth curve of earlier years has
continued with further major contract wins and projects
delivered so that in the field of rail, we have now got all
the accreditations and track record necessary for major
projects across Overground rail, Underground rail and
the DLR.
Going forward we see considerable further potential
in major rail projects such as HS2. Further to this, we
are also determined that in the short and medium term,
TClarke will follow its success in rail markets with a
breakthrough in the airports market.
Revenue 2014: £18m
Forward order book: £31m
Mission Critical
Critical power and power projects
In the three years since launch, the Mission Critical
business has brought in revenue in excess of £50m and
established itself within the market place. In 2014 our
Mission Critical team successfully completed a number of
stand alone projects as well as collaborating on major
TClarke group projects where their skills were needed.
This is a business which we have created from our own
existing resources, supported entirely with existing
infrastructure. The market for very high quality engineers
capable of understanding and delivering solutions for data
centres and complex infrastructure jobs will only grow in
the medium and long term and our brand now has the
market presence we targeted.
Revenue 2014: £8m
Forward order book: £6m
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Residential & Hotels
Industry-leading one stop solutions
Green Technologies
Full catalogue of green capabilities
TClarke has world class green technologies capability
nationwide.
When we launched our Green Technologies offering just
a few years ago, the environmental technologies and
associated engineering skills involved were largely new
to mainstream construction. Today they are adopted in
almost every new building as a central part of the
mechanical, electrical and ICT building services package.
New green technologies will follow others into this
mainstream. In 2014 we introduced airsourced heating
systems into residential projects, for example.
TClarke Group has exceptional credentials in the sector
beyond the mainstream of commercial, residential and
industrial ‘green’ technologies. We have built major PV
farms, major recycling operations and a string of BREEAM
Outstanding and Excellent projects.
We will continue to develop, invest in and market
our nationwide expertise in Green Technologies - however,
as Green Technologies become more deeply embedded in
M&E contracts, it may not be worthwhile, easy or helpful
to measure it as a separate number each year.
There continues to be a boom in this market and we enjoy
excellent market share in Scotland and a strong, controlled
market share in London. Our work in this area has for
years been innovative, developing new ways to fast track
processes, increase quality and integrate the increasing
range of green and ICT services within the building
services packages we deliver.
Although there are heavy demands for our services in
London we have chosen to control our exposure to these
projects within a balanced portfolio of project types.
Revenue 2014: £30m
Forward order book: £26m
Manufacturing Services
In-house precision prefabrication & engineering
TClarke has manufacturing capability across all regions.
Our flagship manufacturing operation is in Harlow, Essex,
serving the dominant London and SE markets. Our
manufacturing operations are truly world class, as
our current and recent projects attest.
TClarke DGR’s manufacturing process is itself uniquely
effective and designed differently from many competitors.
Our process builds in a very high quality supply chain for
specific elements within the flow, so that our workshops
are absolutely focused on quality and flexibility in delivery
to meet the fast track, high pressure nature of the client
projects we serve.
Manufacturing is a capability which is critical in helping us
to win mechanical or M&E packages. We do not sell our
manufacturing capability separately or as a commodity
purchase. So the output numbers of this incredibly
successful and capable operation are included within our
overall M&E figures.
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What we do where we do it
TClarke is a nationwide Building Services contractor -
our principal activities are the installation of electrical,
mechanical and ICT services nationwide. We also provide
a comprehensive range of associated products and
in-house manufacture, design and engineering services.
We serve a very diverse range of clients, ranging from
global media, financial services and manufacturing
organisations to main contractors in the construction
industry, housebuilders and a wide range of public and
private sector clients.
We are headquartered in Moorgate in the City of London
and have regional operations across the country.
Reorganisation of our regional
operations in 2015
TClarke Group has been working to increase efficiency and
market opportunities generated from our regional network.
TClarke Group operates from 15 locations beyond our
London Headquarters. In the last few years we have been
reorganising our nationwide operation to integrate and
improve the efficiency of all our group back office, IT,
operational systems, accounting and administrative
functions. In 2014 we began in earnest with the process
of rationalising and integrating our sales and marketing
activities.
This process has resulted in a series of efficiencies and
new business gains reported in previous years and on our
website.
As the next logical stage in this process, in 2015 we will
be introducing a new regional structure based around four
operating divisions:
London & South East
Central & West
North
Scotland
These new divisions have compelling logic based around
our regional resources, market opportunities and
operational efficiency. During 2015 we envisage
completing the legal and contractual work necessary
to move the whole business onto this new footing and
legal structure.
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What we do where we operate, our UK network
We have 16 local offices located to serve
every part of the country.
In 2014 the resources this network offered
included over 1,200 staff and directly employed
operatives. Included within this number we had
more than 100 apprentices working within the
group.
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Our governance structure
The Board
The Board is collectively responsible for the effective oversight of the company and its businesses. It also determines the strategic
direction and governance structure of the company to enable it to achieve long-term success and deliver sustainable shareholder
value. The Board takes the lead in safeguarding the reputation of the company and ensuring that the company maintains a sound
system of internal control. The Board’s full responsibilities are set out in the schedule of matters reserved for the Board.
The Chairman is responsible for the leadership and management of the Board and its governance. By promoting a culture of
openness and debate, he facilitates the effective contribution of all directors and helps maintain constructive relations between
executive and non-executive directors.
The Chief Executive is responsible for the executive leadership and day to day management of the company, to ensure the
delivery of the strategy agreed by the Board. Through his leadership of the Group Management Board he demonstrates his
commitment to health and safety, operational and financial performance.
The Senior Independent Director acts as a sounding board for the Chairman and serves as an intermediary for the other
directors, as well as shareholders as required.
Independent of management, the non-executive directors bring diverse skills and experience vital to constructive challenge and
debate. The non-executive directors provide the membership of the Audit, Remuneration and Nominations Committees.
Board committees
The Board delegates authority to its committees to carry out certain tasks on its behalf, so that it can operate efficiently and give
the right level of attention to consideration of relevant matters. These committees are summarised below; their full terms of
reference are available on the company’s website.
Audit Committee
Remuneration Committee
Nominations Committee
The Audit Committee oversees the
company’s financial reporting, reviews
the company’s internal control and
risk management systems, and
oversees the services provided by
the external auditors and their
remuneration.
The Remuneration Committee
determines the remuneration policy
and practices to attract, motivate and
retain high calibre executive directors
and other senior employees to deliver
value for shareholders and to maintain
high ethical standards.
The Nominations Committee is
responsible for considering the
structure, size and composition of
the board and its committees, and
succession planning. The Nominations
Committee also identifies and
proposes individuals to be directors
and establishes the criteria for any
new board appointment.
Group Management Board
The Group Management Board comprises the executive directors and other key members of the group’s management team,
including representatives of the regional businesses. The role of the Group Management Board is to co-ordinate and direct the
efforts of the three regional businesses and the individual offices below them to manage risk and deliver value for the group as
a whole across our target sectors in line with the group’s strategy. The Group Management Board considers group initiatives on
matters such as Health and Safety, Employee involvement, and the development of new services and areas of expertise. The Group
Management Board also reviews the operational effectiveness of the business units in matters such as tender submission and
success rates, cash generation and maintenance, and health and safety performance.
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Our Board
The successful delivery of our strategy is dependent
on attracting and retaining the right talent. This starts
with our Board. A broad range of expertise and
backgrounds ensures a good balance of skills, expertise
and knowledge, but behaviour and dynamics are also
important - lively debate and constructive challenge
are encouraged, and high standards of business ethics
required.
The Board has been refreshed during the year; David
Henderson joined the board on 1st January 2014 as a
non-executive director and took over as Chairman of the
Board at the close of the Annual General Meeting when
the previous chairman, Russell Race stepped down from
the board. Tony Giddings joined the company as an
independent non-executive director on 1st October 2014,
and Danny Robson joined the Board on 1st January 2015
as an additional executive director.
Details of the current board members are set out on
pages 58 to 59.
Aligning executive
remuneration to strategy
The Remuneration Committee determines the service
contracts and base salary levels for the executive
directors and other senior managers to ensure they
promote the attraction, motivation and retention of the
high calibre executives needed to deliver the group’s
strategy. Basic salary and benefits are positioned taking
into account the basic pay levels available in similar
companies, and challenging but rewarding annual bonus
and long-term incentive plans align the executives’
remuneration with the growth strategy of the company.
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Internal controls and risk management
The ability of the group to identify and manage effectively
the risks to its businesses and operations is fundamental
to the successful delivery of the group’s strategy and the
protection of its assets and reputation.
The board is responsible for defining the group’s appetite
for and approach to risk, including the group’s system of
risk management and internal controls. The board has
delegated to the Audit Committee the responsibility for
reviewing the effectiveness of the group’s internal
controls, including the systems established to identify,
assess, manage and monitor risk and provide assurance.
A report detailing the key risks and action plans to
address the risks is prepared annually and reviewed
by the Audit Committee. The last report was prepared
in March 2015 and included a review of the risk
management processes and procedures in place, the key
risks arising and the actions in place to mitigate those
risks during the financial year ended 31st December
2014. On the recommendation of the Audit Committee,
the Board has concluded that the group maintained
adequate risk management and internal control systems
throughout the year ended 31st December 2014.
Our risk management process
The group’s risk management framework requires all
business units to identify, assess and quantify the key
risks facing them which could impact on their ability to
deliver their financial and operational objectives. The
business units maintain a register of the key risks facing
the business, including an assessment of the potential
and likely impact pre- and post-mitigation, and an
assessment of the effectiveness of the controls in place
to identify and manage potential risks. Actions designed
to mitigate identified risks and implement control and
process improvements are discussed and agreed with
group management. Developments in key risks, including
an assessment of the effectiveness of mitigating actions
and controls, are reported to and discussed by the Board
each month.
What are the risks?
The principal risks faced by the group and the mitigating
actions and controls in place to address these risks are
set out in the table below, which also sets out how the
principal risks and mitigating actions align to our five
strategic objectives:
1. Deliver a complete high quality nationwide building
services capability
2. Build a growth-ready platform
3. Retain and enhance our classic brand advantages
4. Focus on innovation and relationships
5. Drive opportunities for sustainable growth
Risk
Strategy
impact
Mitigation
Change
from 2013
Main drivers
of change
Market conditions
The group is dependent on the planned
level of construction and maintenance
expenditure by both the public and private
sectors.
There were some encouraging signs
during 2014 that the construction sector
is beginning to recover, but regional
expenditure is still constrained by public
finances and there are concerns over
resourcing levels.
4,5
The group continues to operate throughout the UK and in a
diverse range of sectors, all linked to our core M&E offering,
so that we are not over reliant on anyone sector or region.
We continue to develop our relationships with key clients,
contractors and suppliers, building on our financial strength
and reputation to ensure we are the M&E contractor of choice.
A number of framework contracts and contract renewals have
been secured in recent years to mitigate against short term
fluctuations in demand.
We have aligned our cost base to reflect anticipated workloads;
further realignments could be undertaken if considered
appropriate to reflect changes in the prevailing market
conditions.
Reputation
The group’s ability to tender for new
business and to maintain strong
relationships with customers, suppliers,
employees and other stakeholders is
dependent on how it is perceived by
others.
3
The group works hard to maintain its reputation in all areas.
The group supports high standards of business ethics,
sustainability and compliance policies, and has a strong
commitment to improving health and safety at work for all.
Feedback is sought from key stakeholders on a regular basis,
and actions arising from this feedback discussed and agreed
at an appropriate level.
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Risk
Strategy
impact
Mitigation
Change
from 2013
Main drivers
of change
3,4
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.
The Board remains committed to the principle that we will not
bid for work below commercially acceptable rates.
A detailed business case is prepared for any proposed
expansion into new geographic areas or business sectors, and
is subject to prior board approval.
1,3
We are continually assessing and managing operational risk
through the bidding stage to the final commissioning of an
installation and handover to the client.
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 insurance requirements are
reassessed annually to mitigate against any claims.
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 identify and address issues as they arise.
Contracts of a significant size or risk are regularly reviewed by
executive management and discussed at Board level. The group
continues to make conservative assessments of final accounts
from project completions and the likely outcome for a number
of ongoing projects.
4
The majority of projects we secure do not allow for the
recovery of increased 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.
Residual risk
has fallen
following the
resolution of
significant
contractual
and litigation
issues during
the year under
review.
1,3
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.
Labour rates are monitored regularly to ensure tender rates are
realistic and increases are managed.
We have continuous dialogue with the trade unions and
continue to review our policies and procedures in managing this
risk.
As growth
returns to
the sector
the demand
for skilled
resources is
becoming more
competitive
Winning new work
Our ability to secure profitable new work
is dependent on our ability to adequately
resource tenders, to understand the
technical and commercial challenges
incumbent in each tender and to price
the associated risks accordingly. If risks
are underpriced, contract losses and
reputational damage may result; if risks
are overpriced, the group will not secure
sufficient tenders to replenish the order
book and grow the business.
Contract delivery
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.
Resources
- components and materials
The group is dependent on the availability
of components and materials of sufficient
quality and at the right price to deliver
projects to the correct specification and
to budget.
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.
Resources - People
Providing a consistently high quality
service to our clients is only possible with
the right people: attracting and retaining
high calibre staff and skilled tradespeople
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.
As the construction sector moves into a
growth phase, the availability of sufficient
skilled human resources following the
lengthy economic downturn is a challenge
for the whole sector, with many people
having left the industry and not being
replaced.
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Risk
Strategy
impact
Mitigation
Change
from 2013
Main drivers
of change
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.
1,3
The Group Managing Director has overall responsibility for
health and safety across the Group and the Board receives
regular reports on health and safety initiatives and incidents.
Detailed policies and procedures are in place and all employees,
subsidiaries, suppliers and subcontractors are required to
comply with all applicable laws, regulations and standards.
The Group Health and Safety Director and Group Environmental
Manager monitor and respond to legal and regulatory
developments. Regular training courses and updates are
provided to ensure all employees are aware
of their responsibilities.
The defined benefit pension scheme is available 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 closed to new members from January 2015.
Ongoing regulatory and funding requirements are monitored
in conjunction with external actuarial advisers and regular
meetings are held with the pension scheme trustees.
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.
Applications for payment are made as work progresses and,
as far as commercially practicable, contractual terms are
negotiated to minimise the gap between work being performed
and receipt of payment.
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 a £5m Revolving Credit Facility,
committed to 31st March 2017, and an £8 million overdraft
facility to help manage short-term fluctuations in working
capital. The group also has in place £20m committed bonding
facilities.
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.
Actuarial
assumptions,
driven by
falling bond
yields, have
significantly
increased
the group’s
exposure to
defined benefits
pension risk
Risk reduced
following the
resolution of
significant
contract issues
and the
resulting
release of cash
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.
2,3
2,4
2,3
2,5
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.
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.
Legal and Regulatory
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.
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Strategic report - What did we achieve?
What did we achieve?
In 2014, as recovery finally began to appear,
TClarke could be seen not only to have
weathered the storm but to have emerged
better focused and with its brand strengths
substantially increased.
The themes that emerge in these news items
make clear sense in the light of our business
strategy, our growth targets and the values
to which we hold.
Here are some news highlights from our year:
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Electricians abseiling at 60 Victoria Embankment, London
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14/01/2014
TClarke upgrades group
health and safety procedures
TClarke’s health and safety record is strong -
and we aim to maintain that. Marc Bailey is
Technical Director for Group Health and Safety
at TClarke and in January he set the scene for
this upgrade exercise.
A new ‘Health and Safety Management
Procedures Manual’ might not be everyone’s
idea of front page news. But there really is
nothing more important. TClarke, like many
of our peers, has worked very hard to
improve standards in our industry. It takes
a lot of work, a lot of communication and
a lot of commitment from the whole
organisation - and then, it takes a whole
lot more work because you can never
stand still - or get complacent.
TClarke London safety team
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Strategic report - What did we achieve?
Working with the DIY SOS team
22/01/2014
06/02/2014
TClarke North West team
helps out with TV’s DIY SOS
New Air Source technology
from our Green Team
Also in January, in Lancashire a team of TClarke
electricians was at work with BBC’s DIY SOS team
in Bury - as TClarke North West MD Andy Smith
reported:
“We were approached by the BBC DIY SOS team to see
if we could help with their big build project in Bury. Our
on-site team was headed up by Phil Howard, Graham
Hothersall, Lee Holmes, Dale Mackley and of course the
DIY SOS electrician Billy Byrne. Like all of the DIY SOS
schemes challenges lay ahead and the whole team were
enthusiastic and focused on achieving the best possible
outcome”.
In February we reported on the introduction of
some new technology from our Green Team with
Springfield in Scotland.
The TClarke Scotland Green Technologies & Renewable
energy department had successfully handed over, in
partnership with Springfield Properties, the first nine
Air Source Heat Pump (ASHP) installations to Muirhouse
Housing Association at the Muirhouse project in Edinburgh.
ASHP work by using the latent heat in the outside air
to deliver heating and hot water to homes using only
electricity to run the fans and compressors.
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Muirhouse project in Edinburgh
Apprentice of the Year finalists
02/02/2014
06/03/2014
One year on - what happens to
our Apprentice of the Year?
In March, as our Apprentice of the Year competition
approached, the previous year’s winner, George
Antino reflected on his progress:
Ark Putney is
full M&E and ICT
building services project
with Lendlease
“The example of Mark Lawrence and Mike Crowder
was a big factor - as a 16 year old leaving school I had
a list of excellent firms, but talking to JTL and various
people and also looking at the example of Mark Lawrence
and Mike Crowder, who lead the business now and who
both served apprenticeships with the firm, it was clear to
me TClarke offered the most.
“I’m really getting the chance to develop now -
Onsite, day-to-day it was all about M&E installation - but
now there’s so much to learn, particularly as this project
at Victoria Station is for London Underground. There are
so many procedures and standards to work within - and
on top of that your programmes need to keep disruption
of services to an absolute minimum.
“I think you should recognise the loyalty you’ve
been shown - I do think we’ve been given a very big
chance simply by getting the apprenticeships with TClarke.
There’s a lot of investment made in you and I think it is
right to repay that loyalty by giving your best in the work
you do.”
Also at the start of March, we reported on a highly
significant win for the firm - a large scale combined
M&E contract. This signalled the opening up of a
whole new market and revenue stream for us in
London and the South East.
Ark Putney was first established in 1904 and the main
part of the school is a grade 2 listed building. Our package
included site wide mains and sub mains distribution,
complete internal and external lighting systems, site-wide
data, fire detection voice alarm, CCTV, access control,
metering and maintenance of systems until handover of
completed phases.
Mechanically we were providing natural gas site wide
distribution, an energy centre heating system, LTHW
site-wide distribution, air conditioning, BMS and smoke
extraction systems, full public health services, above
ground drainage, overflow and condensate systems,
rainwater installation, portable drinking water, and hot and
cold domestic water services. We were also carrying out
full surveys to enable full integration into existing systems.
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M&E from TClarke Bristol and TClarke DGR
21/03/2014
04/04/2014
The full service anywhere:
Bristol team brings in DGR
Our new Design & Build
operation is open for business
Later in March, that combined M&E capability on
large scale projects was again demonstrated in
Reading. This time the combination was between
our TClarke DGR mechanical offering and our
Bristol team.
TClarke Bristol team’s win of the major office
development at 450 South Oak, Greenpark, Reading
led to a collaboration between them and our own DGR
Mechanical operation, which has a world class reputation
for mechanical installations, earned on major London
projects like the Shard.
TClarke Bristol Mechanical Project Manager Chris Beale,
talked about the practical experience of collaboration:
“Working with the DGR team has been seamless, and their
attitude towards all aspects of the project from Health &
Safety through to maintaining and in some cases bettering
the Construction Programme really has been truly
impressive”.
At the start of April, we announced a new operating
division and our identification of a potential new
revenue stream that would also further enhance our
offer and skillset. The new division introduced new
senior engineers into our business, led by TClarke
Design & Build Director Paul Barnes who described
the market opportunity:
“You have to have the delivery behind your proposition -
that is the real attraction for me in coming to TClarke
because this allows me to bring the framework of a highly
experienced and capable team and back that up with world
class delivery. One stop design and build is not a new idea
or proposition for the market; however the fact that we
will be a true one stop shop and not just a team that offers
a consultant design delivered by contractor will make us
stand apart from much of the competition. What we’re
offering is a completely seamless transition from design
concept to completion in which our clients work directly
with the same single team throughout the whole process.
The advantages of this service are numerous including
speed to site, early supply chain involvement, cost certainty
and a fully co-ordinated and compliant design facilitating a
quality fast track installation completed on time by the
TClarke delivery team.”
01/05/2014
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01/05/2014
Departing Chairman
Russell Race reflects on
16 years with the business
Russell Race had spent 16 years with the business,
14 of them as Chairman. As he stepped down in
2014, we published an interview he gave as he
handed over to David Henderson; here is a brief
extract from the article:
“It all comes down to two things: quality and relationships.
What you see with TClarke is that at every level in the
organisation, you have people with motivation and
commitment not to mention the skill to deliver a job.
The technical directors are of very high quality, the project
engineers are of high quality and motivation - as are the
site managers and their teams. When projects reach critical
moments, when the pressure is really on, TClarke teams
are organised, experienced and they have the sheer scale
to be able to deliver.
Russell Race
“The last thing I wanted to say
was this: these are good people
- I have enjoyed working with
them. TClarke has always been
about the characters - and I see
no sign of that changing. Long
may it continue! This is the kind
of business the country needs.”
01/06/2014
Danny Robson says
‘The time is right’ for growth
in mechanical side of business
In June, Danny Robson, MD of DGR gave his
thoughts on the strategic future of our mechanical
operations. Here is a short extract from the
interview he gave in June.
“The recipe is simple - excellent people and hard work;
DGR has a staff retention rate approaching 98%”
“If it is true that we are starting to get recognised as
capable of competing for the largest M&E schemes then
that’s down to getting projects delivered - which are
increasingly complex, demanding, and tight in timescale.
These projects are not easy. Success is, in my view, about
nothing more or less than having very good people.
“As a business, the first thing we’ve done is keep good
people. Our staff retention is something like 98%. Our high
level management team is incredibly stable and we have
managed to retain every one, despite the fact that none are
tied in. We’ve lost only a tiny number of project managers,
engineers and back of house people. And this has been key.
“It might sound a bit corny but we’ve got a family
mentality. We recognise and appreciate hard workers and in
truth we’re all hard workers. But at the same time, in a
difficult, highly pressurised industry, we don’t employ a red
card system - so if you make a mistake we don’t kick and
bite, you get educated and supported to learn and move
forward. That’s the other side of the coin - we’re very loyal
to people in that way.”
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Major South West wins including Milbay, Plymouth
Awarded NHBC Regional "Pride in the Job"
16/06/2014
09/07/2014
New leadership
builds growth across
the sectors in South West
Scotland Residential
has thirteen award winning
NHBC partners in 2014
In the middle of June, we took a look at the
progress made by a new leadership team in the
South West, headed by Rob Faro, as they reported
a series of high profile completions and new projects
in the region:
“You can see here that TClarke are now recognised as one
of the region’s leading M&E contractors and our coverage,
group back up and trademark in-house quality approach are
all contributing to that.
“TClarke has just completed a major Animal Management
and Veterinary Services building at the Duchy College
in Rosewarne, working with Midas construction on a full
M&E design and build. We provided everything from PV
installation to fire and intruder alarm design and installation
from our specialist Intelligent Buildings team. On top of
this we are also embarking on a series of 12 school
refurbishments, to continue our long term programme
which has been delivered successfully over the last three
years. Delivering to very tight timescales, defect-free in
remote rural locations, the business is extremely proud of
the work done by our teams on these projects.”
In July we saw how TClarke Scotland’s growth was
matched by quality in delivery. TClarke’s Residential
Electrical, Plumbing & Intelligent Buildings
departments were again successful with the recently
awarded NHBC Regional "Pride in the Job" awards
for residential projects throughout Scotland.
Our clients Barratt Homes East, West & North, CALA Homes
East & West, Mactaggart & Mickel, Millers Homes East &
West and Taylor Wimpey Homes East & West had great
success in winning 13 awards in this highly competitive
annual competition.
TClarke Scotland MD Gary Jackson commented:
“Standards this year have again been very high with our
teams of electricians, plumbers and TClarke Intelligent
Buildings engineers across Scotland partnering their project
developers to achieve recognition with other trades for
exemplary standards of construction.”
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28/08/2014
Turnkey engineering
for the nuclear industry
In July, TClarke NW’s MD Andy Smith introduced a
classic TClarke turnkey design and build project in
the manufacturing sector - a prefabricated Mask Air
Compressor Plant for Springfields Fuels:
“This is a special environment - a world class nuclear fuels
facility; we were engaged to design and install a mask air
compressor unit to provide breathing air right across the
site. The plant was to be prefabricated so that it could be
moved in future to a different location if necessary and
TClarke NW’s Ivan Bland working for Springfields Fuels
the air supply was to be delivered to various points
across the site. We’ve delivered a complete turnkey
solution here. Design, civil, mechanical, electrical and
controls engineering, precisely to customer requirements,
on time and on budget. I think the real difference between
us and the competition, is that we can bring you onsite to
inspect the quality of our designs and installation. You can
see for yourself the standards of work we can achieve,
from the design concept, to the quality of the welds, to
the way we managed the process and specialist suppliers,
to the value and cost achieved.”
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28/08/2014
Our new smartphone
safety reporting app launches
on iTunes and Google Play
In August, following months of trialling,
TClarke achieved what may well have been a UK
construction industry first - a smartphone safety
reporting app.
The app was made universally available for staff and
supply chain partners via iTunes and Google Play. It
plugged people onsite directly into the national and local
health and safety system - making safety risk and near
miss reporting instant, comprehensive, easy to do and
supported with photos. Group CEO, Mark Lawrence
explained how and why the app has been developed:
“TClarke is recognised by industry bodies and our partners
as one of those companies that doesn’t just deliver good
safety performance - we actively set out to innovate and
push safety standards forward. Our Safety team, led by
Marc Bailey and with Josh Bourne playing a major role,
set out to take our existing and successful “You See, You
Say” campaign for safety risk reporting, add near miss
reporting and build in a number of useful features which
smartphones offer. These include a simple level of
security, the ability to use location finding services, a one
time login and details process that stores your details and
the project you are working on and the camera capabilities
that smartphones have.
“To this we’ve added the clean design and ergonomics of
the latest iPhone buttons and design, so that the whole
experience is quick, simple and intuitive for our people
onsite - and also for our supply chain partners.”
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10/10/2014
TClarke South West and
TClarke East combine
in medical controls offer
In October, we reported on a unique healthcare
offer, developed by TClarke East:
TClarke South West and TClarke East combined to
exploit their combined healthcare skills and TClarke East’s
industry leading healthcare controls manufacturing
operation.
TClarke East had in recent years, in close relationship
with global scanner manufacturers Siemens and GE,
developed a very high quality in-house design and
manufacturing operation for scanner controls. Scanners
Amanda Sheehan of TClarke East’s Precision Controls operation
are installed in every hospital across the UK and Ireland
and are central to all kinds of patient treatments. TClarke’s
manufacturing operation, installation track record and
deep relationships with these manufacturers are strategic
business advantages.
Group CEO Mark Lawrence was pleased to show another
example of organic growth potential developing rapidly
from the plans set out by the business:
“Siemens and GE install hundreds of scanners nationwide
and the work of the team from TClarke East, led by Nigel
Thompson, has put us in a very strong position to grow in
the healthcare market with a very high quality controls
manufacturing service and an associated high quality
specialist installation service.”
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Andy Smith and Chris Shorrock at Lancaster University
20/10/2014
Sending everyone home
safe at night
TClarke is an organisation that takes safety
extremely seriously and in October we looked at
the culture that underpinned our approach.
What TClarke DGR MD Danny Robson identified as an
‘active approach to raising safety standards’ which he
found from the group’s London based safety team is
exactly the same in regional operations as TClarke North
West’s Chris Shorrock and MD Andy Smith discussed:
Chris Shorrock: “We’ve always benefitted from high
levels of core staff within the organisation and that
cohesive team is one of the keys to our safety approach.
We all know each other here - so you’re looking out for
each other all the time and the bonds between people
mean that its a natural thing to do.”
Andy Smith: “I think equally that we are always working
very hard to keep the topic of safety fresh, make it
interesting and generate awareness again, because unless
you keep on doing that (and that means being a stickler
for details like correct safety equipment at all times - as
much as major safety campaigns and procedures) then the
risk is that people could lose focus on safety.”
Chris Shorrock: “If you look at the Spine Duct Pumping
project at Lancaster University where we are working in
confined spaces underground, you can see that we’ve so
far achieved 18 weeks onsite incident free. That is down
to good teams and the avoidance of complacency. It is
complacency that leads to confined space accidents and
so, for example, when people are getting in and out of the
hole in the ground, we never allow anyone to think of
avoiding the careful safety procedures. They do take time,
they do take discipline but they do mean that everyone
goes home at night in the same safe condition that they
left home in the morning.”
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TClarke wins twice at Springfields
13/11/2014
TClarke Apprentice
is JTL’s Wales
Apprentice
of the Year
Later in November we reported how Michael
O’Donovan, who was one of the runners up in our
own TClarke Apprentice of the Year 2013, had won
another award: We reprinted an article from our
partner training organisation, JTL:
‘Michael O’Donovan, aged 21 and from Henllys, Cwmbran,
has been named JTL’s Apprentice of the Year 2014 for
Wales. His win, which saw him beat off stiff competition
from five other candidates, was announced at an award
ceremony held at Celtic Manor Resort on Thursday 6th
November.
Michael will now represent Wales at a national event held
in London in February 2015, when JTL’s seven regional
winners from across England and Wales will come together
to discover who is the overall JTL Apprentice of the Year
2014.
Michael, who attended the awards with his family, was
also joined by his boss, Ellis John, Managing Director at
TClarke, and his JTL Training Officer, Matthew Bailey.
“I feel honoured to have been chosen as the Welsh
Apprentice of the Year, but I wouldn’t be in this position
without the support of my training officer, my employer,
my college tutors and my family,” says Michael. “I’ve
always been practically minded and, having enjoyed work
experience with TClarke whilst I was still at school, I knew
I wanted to become an electrician. I got an apprenticeship
with a local company but soon realised that the experience
I needed wasn’t on offer, so I contacted TClarke and with
some help from Matthew at JTL and my college tutors I
was able to transfer my employment. I haven’t looked
back since – I’ve completed my apprenticeship within
three years and I thoroughly enjoy what I do.”
10/11/2014
TClarke wins twice
at Springfields
Safety Awards 2014
In November TClarke North West won two awards
at the Springfields Rogan Awards. Springfields,
which manufactures nuclear fuel, is a world class
operation and has an exceptional approach to
safety - so winning these awards, was a major
achievement.
The first award was the Environmental Award, won with
our ‘Our Carbon Footprint’ entry, which focused on the
reduction of CO2 emissions from vehicles, the introduction
of trackers and new commercial vehicles. The second
award - The Contractors Award - was won with our
longstanding “You See, You Say” campaign and recognised
the way that the campaign has been driven over the last
three years to increase safety performance threefold, and
culminating in the launch of our new “You See, You Say”
smartphone app for operatives to report near miss or
safety risks. The awards were received by two of the
people responsible for winning them; H&S Assistant Jodie
Worthington and Site Safety Co-ordinator Tony Hollis.
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London Wall Place
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13/11/2014
TClarke unveils £75M
of project wins in London
In an official announcement to the City in
November, TClarke’s announced over £75 million
of major new project wins in London - all starting
in 2015. These included Beaufort House in Hendon,
London Wall Place, One Angel Court, Principal
Place, Bishopsgate and Rathbone Square.
Group CEO Mark Lawrence offered his analysis:
“In our last city announcement on 8 October, we
mentioned a series of projects in late stages of
negotiation. Today I’m glad to introduce several projects,
each one of which is in its own right a major cause for
satisfaction and celebration for anyone connected with our
business.
“I would encourage people to look beyond the headline
figure of £75 million in fully committed projects; these jobs
are significant in other ways which, if you understand our
sector, will be central to your evaluation of TClarke.
“As ever, let me begin with a sensible note of caution.
These jobs do not mean that the market is returned to
normal quite yet. We have always said that the market will
not fully recover until late 2015 and we still believe that.
“But these wins are highly significant in the following
ways:
“Firstly, if you remember that these are all top end
construction projects - large scale, high quality and highly
complex. This is the cutting edge of the industry where
new techniques are tested hard - not just innovative
working practices, but innovative contracts and ways of
collaboration. So if you can win one or two of these
projects then you can fairly say that the market values
what you offer. We are announcing five here, but if you
look to the end of this article, you can see we are working
on a far larger number of these projects in London alone.
“Secondly, we have remained true to our belief in our
people - in real apprenticeships, in directly employed
operatives and in loyal, longstanding teams which from
apprentice and site operative to divisional director are
committed, hard working and capable people.
“Throughout the recession we have continued to train and
employ that way because we as a board and as a
company, truly believe that the quality of our people is the
key thing that our customers buy. As the market now
begins to emerge from recession, these wins signal the
fact that some of the most prestigious clients and main
contractors in the industry are looking to lock in TClarke
teams for their projects. This also provides a clear
message about us.
“Thirdly and very simply, these wins are a strong
indication that you can believe that our medium term
business strategy is the right one to deliver value. We are
an organisation which has been built on genuine and
honest values that run right through the company. We see
worthwhile growth opportunities now across a number of
sectors across the UK, but as ever we will pursue these in
intelligent and steady ways that allow us to keep on
delivering what our brand promises - strong innovation,
strong relationships, strong teams and high quality.”
Beaufort House in Hendon
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Brand new and highly experienced - TClarke Design & Build
18/11/2014
40% of Transport team’s work
is now for Design & Build
contracts
And also in November we looked at the quality
and value of the work being won by our Transport
division. Wins over the last 18 months meant that
the Transport team’s order book stretched ahead
to 2022.
The team that started from scratch in 2006 was now
contributing £22m to annual turnover and targeting £25m
next year. The team itself had now grown organically to
include its own design team, planning team, commercial
team, plus a highly experienced, trained and accredited
workforce. However this growth was not primarily about
adding to the turnover number. These projects are
significant ones, as Robin Aves, Transport Director says:
“London Underground’s Bank Station Upgrade is, in many
people’s view is one of the most significant projects going
on anywhere in UK construction, using at it does, the
Innovative Contractor Engagement (ICE) procurement
model which places a whole new level of focus and
energy on collaboration and innovation for the creation
of real value.
“Work with Costain on COPath at Waterloo Station is our
first project with this major contractor and it is truly
fascinating and forward looking, using technology as it
does to track the movements of passengers within stations
and airports. So far I’m delighted to see we’re heading
their supply chain in key performance metrics there.
“And so, as I speak we have a 15 strong design team
working on the Bank Station Underground and around
40% of our contract wins are for full design and build
contracts. Why is this significant? It moves us up the food
chain if you like, it takes us into areas where you can
deliver more value to the customer and yourself receive
more value and reward for the work you do. So this is
exactly the kind of work that we want.”
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04/12/2014
TClarke East delivers full package
for new stadium stand at
Peterborough Utd
In December we reported how TClarke’s
Huntingdon team had concluded a six month
programme to deliver a full building services
package including mechanical electrical and ICT
works. The team led by Andy Varney and John
Russo packed a host of features in to make the
stand worthy of any 21st Century stadium as Andy
Varney explained:
“This is a football stand first and foremost, but today it
also fulfils a whole range of other functions for the club
and to do that, and do it efficiently and with a good
impact on the environment, it has many advanced
features:
The new stand at Peterborough United
“On the electrical side we installed general power and
lighting plus emergency lighting throughout with CCTV,
fire alarm, TV, data installation to all floors, local electric
and water heaters throughout and a photovoltaic system
on the roof. We also delivered a lightning protection
system to the complete building and external lighting.”
“On the mechanical side, we installed a new water main, a
rainwater harvesting system, controlled via PIR sensors
and feeding the stand toilets, new controls and pipework
to the existing pitch irrigation system, new water tanks,
drainage, a complete refrigerant and heating cooling
system and a full ventilation system with AHU’s on the
roof.”
“A complete BMS has been installed to control and monitor
all mechanical systems and deliver energy savings and
cost reductions. It has been a great project to work on for
all of us and we’re delighted to have played our part in
what is one of the most important community facilities in
Peterborough.”
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23/12/2014
Apprentice Jack Hammond
does us proud at the
House of Commons
As the year closed, we reported that TClarke
London apprentice Jack Hammond had been at
the House of Commons, representing the company
at the launch of The Electrotechnical Skills
Partnership.
John Burrows, who leads TClarke’s Training, commented:
‘I’m delighted for Jack, and it is great to see another of
our apprentices impressing people outside the company.
We take great care selecting apprentices and over the
last years we’ve stayed 100% committed to training
apprentices. Our belief in quality people as the key to
quality work is not complicated - but Jack is one of many
young people who we hope and expect to see progressing
through our business and offering clients a solid, capable
and highly motivated resource for work on their project.
It is central to our business plan and everyone in the
company knows it.’
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Key performance indicators
Revenue by region (£m)
250
200
150
100
50
0
2012
2013
2014
Underlying operating margin
6%
5%
4%
3%
2%
1%
0
-1%
South
North
Scotland
• Scotland
• North
• South
• 2012
• 2013
• 2014
Net underlying overheads as percentage of revenue
11.0%
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
2012
2013
2014
Net cash (£m)
Cash generated by operations (£m)
6.0
5.0
4.0
3.0
2.0
1.0
0
6.0
4.0
2.0
0
-2.0
-4.0
2012 2013
2014
2012 2013
2014
Revenue
Turnover growth is key to improving future profitability.
By focusing on our key target sectors we aim to grow
the business in a profitable and sustainable way.
Revenue increased by 4.8% in 2014.
Underlying operating margin
Together with revenue, operating margin determines
the profitability of our business. Underlying operating
margin excludes the impact of non-recurring items
(including exceptional claim settlement costs) and
amortisation of intangible assets. 2014 operating margin
was impacted by a loss-making Mission Critical project.
Overheads
We monitor net underlying overheads (being other
operating income less other administrative expenses)
as an indicator of the group’s operating efficiency. The
percentage increased slightly during the year due to the
group’s opening of the new Design and Build office at
Colchester, which will be revenue and earnings
enhancing in 2015.
Net cash
Cash resources and cash generation are key to our ability
to fund our ongoing operations. Cash increased in the year
due to final account settlements and strong working
capital management. At the year end we had positive net
cash and £8m undrawn facilities.
s
d
n
e
d
v
D
i
i
Movements in tangible net worth (£m)
n
o
i
s
n
e
P
t
i
c
i
f
e
d
4
1
/
1
0
/
1
0
x
a
t
e
r
o
f
e
b
t
i
f
o
r
p
i
g
n
y
l
r
e
d
n
U
s
m
e
t
i
g
n
i
r
r
u
c
e
r
-
n
o
N
2.0
1.0
0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
4
1
/
2
1
/
1
3
s
t
n
e
m
e
v
o
m
r
e
h
t
o
d
n
a
x
a
T
Tangible net worth (£m)
Tangible net worth
Tangible net worth (net assets excluding intangible assets)
is used by some parties in assessing the financial strength
of our business. Tangible net
worth decreased by £5.4m
during the year due to
macroeconomic factors
adversely impacting the
pension scheme deficit.
-4.0
-2.0
2.0
0
-6.0
2012 2013
2014
54
Annual Report & financial statements 2014
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Strategic report - What did we achieve?
Health and safety at TClarke
The long established Health and Safety ‘Journey’ continues to gather increased momentum, with the number
of employees fully embracing our health and safety culture increasing by the day. How is this being achieved?
Health and safety passport
2012
2013
2014
Accident statistics
70
60
50
40
30
20
10
0
• Scotland
• North
• South
2012
2013
2014
and third parties, and to take action before the potential
for harm is realised. The increase in the reporting of near
misses in 2014 resulted in a decrease in RIDDOR
Reportable accidents of 66%.
Health and Safety Passport
The design for the third edition of our Health and Safety
Passport was completed by our supply chain designer with
suitable photographs selected from pictures taken by our
‘in-house’ photographer (using Real Operatives on Real
Projects). The Passport (re-issued in January 2015)
contains, as in previous editions, a health and safety
handbook in the front and a record of the operatives
training achievement in the back.
Accident statistics
Although it is disappointing to note that there was an
increase in the number of accidents in 2014, what is very
pleasing to report is that the number of Reportable Injuries
has considerably reduced for the third year running.
We are convinced that the accident statistics are a
reflection of the improved and regimented reporting
approach desired by the Organisation, as prescribed during
training days and is as detailed in the Health and Safety
Procedures Manual.
You See, You Say! Near-miss reporting
The ‘You See, You Say’ near miss reporting scheme,
both hard and electronic (mobile phone App) versions,
has also gained momentum and the number of reports
has increased by 370% from 396 in 2013 to 1876 in 2014,
which demonstrates that our employees have really
bought into our health and safety culture. Reporting of
near misses allows TClarke to investigate non-loss time
occurrences and develop measures to prevent the
occurrences from becoming loss related. The increase
in the reporting of near misses has enabled TClarke to
identify areas that had the potential to cause harm, not
just to TClarke employees but to other trade contractors
‘You See, You Say’
2000
1500
1000
500
0
1876
396
112
2012
2013
2014
55
Annual Report & financial statements 2014
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Strategic report - What did we achieve?
Engagement
We pride ourselves on engagement initiated by the
operatives who are now approaching us and seeking the
professional advice that is given by our in-house Health
and Safety Department on a regular basis. We have even
been told that employees go home and research subjects
they learn about during in-house training.
2014 saw a big push on ‘Dust Control’ procedures in
conjunction with the HSE’s blitz on preventing ill health
from the inhalation of silica dust. We identified a number
of practical tools to ensure dust extraction at the point of
creation, when drilling concrete and masonry.
We also became members of Constructing Better Health.
The number of health and safety alerts and bulletins
issued from Head Office totalled 53 for the year and
maintained another one of our key objectives of
maintaining an important flow of Health and Safety
information to the operatives.
Training centre
In addition to TClarke being a licensed CSCS test provider
and one day In-House, Health and Safety training
provider, we are now able to offer the following courses at
our Head Office Training Centre. These include;
• CITB One Day Health and Safety awareness
• SMSTS / SSSTS Site management and site supervisor
safety training scheme
• CIEH One day Health and Safety awareness
• Manual Handling Training
• Asbestos Awareness (UKATA and non – UKATA)
• Emergency First Aid / Appointed Persons First Aid
• SEATS (Site Environmental Awareness Training
Scheme)
• Directors Health and Safety one day
• IOSH
• Working at heights / Harness Awareness
• Environmental Awareness
Health and Safety, from the ‘Top’ down.
This year saw more training from the ‘top’ down which
included 26 key directors and the Chief Executive Officer
undertaking the IOSH – Safety for Senior Executives
Course, which enhances their existing IOSH – Managing
Safely in Construction and CITB Site Safety Managers
Training courses.
Moving forward
We are proud of our on-going Health and Safety
commitment, achievement and initiatives and aim to
maintain our continuing engagement with operatives
through our continued information dissemination.
This year we intend to introduce our latest poster
campaign which will be interactive with accompanying
Tool Box Talks.
The theme for the campaign is ‘Would Ya?’ and is based
on a series of ‘made-up’ scenarios where individuals are
seen to place themselves at risk and workers will be
challenged on their own perceptions of the risk presented.
Our Health and Safety Posters have historically been well
received by the industry and we always endeavour to
provoke a thought process within individuals, to encourage
their own Health and Safety self-preservation.
Diversity
The group values human rights and diversity and maintains an equal opportunities policy, selecting and promoting
employees based on their aptitudes and abilities. Data concerning gender diversification is given below.
Gender diversification as at 31st December 2014
Directors
Senior management
Staff
Skilled operatives
Apprentices and trainees
Total
Male
6
26
271
763
102
1,168
2014
Female
1
0
79
12
3
95
Total
7
26
350
775
105
1,263
Male
5
28
219
767
96
1,115
2013
Female
1
1
75
11
1
89
Total
6
29
294
778
97
1,204
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Strategic report - What did we achieve?
The group recognises its obligations towards employment of disabled people and gives full and fair consideration to
suitable applicants. Staff who may become disabled are given opportunities either to continue in their employment or
to be retained for other suitable positions. It is our policy that training, career development and promotion of disabled
employees should as far as possible be identical to that of other employees.
We appreciate the mutual benefits of keeping employees informed and take appropriate steps to ensure that employees
are kept aware of matters that are of concern to them. The company has a share save scheme for eligible employees,
the TClarke Savings Related Share Option Scheme. Details of share options granted under the scheme are disclosed in
Note 19 to the financial statements.
Greenhouse gas emissions
Greenhouse gas emissions
2014
Scope 1 emissions
Scope 2 emissions
Total scope 1 & 2 emissions
Revenue
Emissions / £1m revenue
2013
Scope 1 emissions
Scope 2 emissions
Total scope 1 & 2 emissions
Revenue
Emissions / £1m revenue
Definitions
1. Scope 1 emissions
2. Scope 2 emissions
3. tC02e
Measure
tC02e
tC02e
tC02e
£m
tC02e
tC02e
tC02e
£m
South
1,304
286
1,590
167.6
9.49
1,191
230
1,421
172.2
8.25
North
410
68
478
43.4
11.01
489
52
541
31.4
17.21
Scotland
376
52
428
16.5
25.94
443
59
502
13.5
37.24
Total
2,090
406
2,496
227.5
10.97
2,123
341
2,464
217.1
11.35
Combustion of fuel and operation of facilities
Electricity purchased from the national grid
Tonnes Carbon Dioxide equivalent
As a responsible company we take our environmental responsibilities seriously. This is the second year we have been
required to report on greenhouse gas (GHG) emissions in accordance with the Companies Act 2006 (Strategic Report
and Directors’ Reports) Regulations 2013. We have collated Scope 1 and Scope 2 emissions data for the year ended
31st December 2014 across the group companies, which are reported in our consolidated financial statements.
The strategic report on pages 2 to 57
was approved by the Board of Directors
and signed on its behalf by
Mark Lawrence
Chief Executive Officer
24th March 2015
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Directors’ report
The Board Non-executive directors
58
David Henderson
Chairman
66 years old,
Second year with
the company:
Chartered Accountant,
Kleinwort Benson Group plc;
Personnel Director 1995;
Chief Executive, private
banking business 1997;
Chairman in 2004.
Appointed
Non-Executive Director
of TClarke 2014.
Member of the
Nominations and
Remuneration Committees.
Iain McCusker
Senior Independent
Non-Executive Director
63 years old,
six years with the company.
Chartered Accountant,
Partner at Coopers
& Lybrand (now
PricewaterhouseCoopers)
until 1994; held senior
Managing Principal and
Director positions within
Unisys and Xerox,
respectively; Managing
Director of ACCA (the
Association of Chartered
Certified Accountants)
2004 to 2007.
Appointed
Non-Executive Director
of TClarke 2009.
Chair of the Audit and
Nominations Committees,
Member of the
Remuneration Committee.
Beverley Stewart
Independent
Non-Executive Director
54 years old,
10 years with the company.
Degree in building
economics, qualified
Chartered Surveyor in 1988.
Co-owner of a partnership
since 1993 providing building
services, cost planning and
asset management
consultancy.
Appointed
Non-Executive Director
of TClarke 2005.
Chair of the
Remuneration Committee,
Member of the Audit and
Nominations Committee.
Tony Giddings
Independent
Non-Executive Director
63 years old,
First year with the company:
As a director of Argent LLP
he has delivered over
£1.4 billion of construction
projects. He has served as a
Board Member of the British
Council for Offices, was
Chairman of the Design and
Build Foundation from 2001
to 2003 and is a Fellow of
the Chartered Institute of
Building.
Appointed
Non-Executive Director
of TClarke 2014.
Member of the
Audit, Nominations and
Remuneration Committees.
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Directors’ report
The Board Executive directors
Danny Robson
Director
45 years old,
5 years with the company.
Mechanical Engineer,
Managing Director DGR
from August 2010,
Executive Director from
1st January 2015.
Mike Crowder
Group Managing Director
50 years old,
29 years with the company.
Electrical Engineer,
Technical Director 1997,
Executive Director 2007,
Managing Director from
1st January 2010.
Martin Walton
Group Finance Director
and Company Secretary
50 years old,
seven years with the
company.
Chartered Accountant, Group
Financial Controller 2007,
Finance Director from
26th October 2010.
Mark Lawrence
Group Chief Executive
47 years old,
30 years with the company.
Electrical Engineer,
Technical Director 1997,
Executive Director 2003,
Managing Director -
London Operations 2007,
Chief Executive from
1st January 2010.
Shareholder information and company advisors
Registered office
45 Moorfields
London EC2Y 9AE
Registered in England
Number: 119351
Bankers
Royal Bank of Scotland
Corporate Banking
280 Bishopsgate
London EC2M 4RB
Corporate broker
N+1 Singer
1 Bartholomew Lane
London EC2N 2AX
Tel: 020 7496 3000
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Tel: 0871 664 0300
Independent auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
59
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Directors’ report
Corporate governance report
Chairman’s introduction
The Board is committed to high standards of corporate
governance and continues to embrace the principles
contained in the UK Corporate Governance Code (‘the
Code’). The Code sets out principles to which the Listing
Rules require all listed companies to adhere, supported
by more detailed provisions.
Our corporate governance report on pages 60 to 64 sets
out how we manage the group, and how we apply the
principles and comply with the provisions of the Code.
The significant challenges faced by the group have tested
the resilience of the group’s governance procedures,
which have not been found wanting. Nevertheless, with
a number of changes to the composition of the board
during 2014 and further developments in corporate
governance requirements, we have during the year
undertaken a comprehensive review of our corporate
governance procedures and instigated a number of
improvements. We have made significant advances in
succession planning, board appraisals, risk management
and going concern considerations. These developments
will be further enhanced by the appointment of a new
company secretary, who will be joining us shortly.
I took over as Chairman when my predecessor, Russell
Race, stood down at the AGM on 9th May 2014. Russell
chaired the Board for a good many years and is a tough
act to follow. As Chairman, my primary responsibility
is to ensure that the board has the right mix of skills,
knowledge and experience so that it works effectively as
a team, supporting management in the formulation and
execution of corporate strategy while holding management
to account for their actions.
David Henderson
Chairman
24th March 2015
Statement of compliance
Throughout the year ended 31st December 2014 the
board considers that it has complied with the provisions of
the Code. The Code is issued by the Financial Reporting
Council (FRC) and is available on the FRC’s website
https://www.frc.org.uk
Structure of the Board
The company is managed by the Board of Directors,
which during the year was comprised of three executive
directors and the non-executive directors (including the
Chairman). A number of changes to the non-executive
members of the Board were made during the year. David
Henderson was appointed to the Board as a non-executive
director on 1st January 2014 and became Chairman
following the AGM on 9th May 2014, Russell Race did
not offer himself for re-election at the AGM having served
sixteen years as a non-executive director (fourteen of
them as Chairman), and Tony Giddings was appointed
as a non-executive director on 1st October 2015. On 1st
January 2015 the Board welcomed Danny Robson as an
additional executive director, increasing the number of
executive directors to four.
The Articles of Association require that one-third of the
directors shall retire by rotation each year and become
eligible for re-election. This excludes those directors who
may be newly appointed during the year, who are eligible
for election at the next Annual General Meeting. Mike
Crowder and Iain McCusker will retire and offer
themselves for re-election and Tony Giddings and Danny
Robson will offer themselves for election at the next
Annual General Meeting on 8th May 2015.
Beverley Stewart, by virtue of having served as a director
of the company for more than nine years, is deemed not
to be independent according to the Code and will
henceforth be subject to annual re-election. However,
Beverley Stewart is deemed by the Board to be
independent in character and judgement, in spite of her
length of service. Russell Race, who retired at the AGM
on 9th May 2014 and who had served on the Board for
sixteen years, was also considered by the Board to be to
be independent in character and judgement, in spite of
his length of service. As a consequence, at least half of
the
the
Mik
serv
dete
Bev
hav
Brie
Chie
prov
60
Annual Report & financial statements 2014
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Directors’ report - Corporate governance report
the directors were deemed to be independent
throughout the year.
Mike Crowder and Danny Robson each have a rolling
service contract with the company which may be
determined on twelve calendar months prior notice in
writing. Beverley Stewart, Iain McCusker and Tony
Giddings do not have service agreements with the
company.
Brief biographies of each director, including the
Chairman, Chief Executive and Senior Independent
Director are provided on pages 58 to 59.
Board meetings
The composition of the Board is designed to ensure
effective management, control and direction of the
group. The roles of Chairman, Chief Executive and Senior
Independent Director are clearly defined and disclosed
on the company’s website.
The Chairman provides leadership to the Board
members, facilitating the effective contribution of all
directors and ensures a positive and constructive
relationship between the executive and non-executive
directors. The Chief Executive is responsible for the
operational management of the group and is accountable
to the Board for the implementation of group strategy.
The Board meets formally once a month to consider and
decide on matters specifically reserved for its attention.
Board papers are circulated sufficiently in advance
of Board meetings to enable time for review. The
attendance of individual directors at formal Board and
sub-committee meetings is set out below.
Number of meetings attended
Board
Audit
Nomination
Remuneration
David Henderson
Russell Race1
Mark Lawrence
Mike Crowder
Martin Walton
Iain McCusker
Beverly Stewart
Tony Giddings2
12
5
12
12
12
12
12
3
1Retired 9th May 2014
2Appointed 1st October 2014
1
–
–
–
–
4
4
2
2
–
–
–
–
2
2
2
3
–
–
–
–
3
3
3
Matters reserved for the Board’s attention include:
• Consideration and approval of the group’s strategy,
budgets, structure and financing requirements
• Consideration and approval of the group’s annual
and interim reports and financial statements
• Consideration and approval of the group’s interim
management statements
• Ensuring the maintenance of a sound system of
internal controls and risk management
• Changes to the structure, size and composition of the
Board recommended by the Nominations Committee
• Establishing committees of the Board and determining
their terms of reference
The non-executive directors meet with the Group
Management Board and other members of the senior
management team at least once a year. In addition,
the non-executive directors make visits to the subsidiary
companies in order to acquaint themselves with the
regional businesses and their senior management.
Performance evaluation
The effectiveness of the contribution and level of
commitment of each director to fulfilling the role of
a director of the company is the subject of continuing
evaluation, having regard to the regularity with which
the Board meets, the limited size of the Board and the
reporting structures which are in place within the
company to monitor performance.
The Chairman primarily, but acting in conjunction with
the Chief Executive, undertakes the task of annual
evaluation of performance and commitment of individual
members of the Board as a whole and its committees.
Training is available for new directors and subsequently
as necessary. The Senior Independent Director, in
conjunction with the other independent non-executive
directors, undertakes the annual appraisal of the
Chairman.
61
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Directors’ report - Corporate governance report
The Board has undertaken an internal appraisal of its
own performance, covering the composition, procedures
and effectiveness of the Board and its committees.
Overall the Board members felt that the Board operated
effectively, however the feedback also identified some
opportunities for the Board to improve its effectiveness.
The points raised will be addressed by the Board
during 2015.
Company Secretary
All directors have access to the advice and services of
the Company Secretary, who ensures that the Board
receives appropriate and timely information, that Board
procedures are followed and that statutory and
regulatory requirements are met. The role of Company
Secretary is currently filled by the Finance Director,
however a new company secretary will be joining the
company shortly at which point the roles of Finance
Director and Company Secretary will be split.
Board Committees
The Board has established the following committees,
whose terms of reference are available on the company’s
website.
Audit Committee
The roles and responsibilities of the Audit Committee
are to:
• Monitor the integrity of the financial statements of the
company and any formal announcements relating to
the company’s financial performance
• Review the company’s internal financial controls and
risk management systems and review the need for
an internal audit function on an annual basis
• Make recommendations to the Board, for it to put
to shareholders, in relation to the appointment of
external auditors and their remuneration and terms
of engagement
• Review the independence of the external auditors
and review the effectiveness of the audit process
• Review the extent of non-audit services provided by
the external auditors.
The Board is satisfied that Iain McCusker (Chair) has
sufficient relevant financial experience.
Nominations Committee
The role of the Nominations Committee is to lead the
process for succession planning and board appointments,
and make recommendations to the main Board.
Remuneration Committee
The role and responsibilities of the Remuneration
Committee are to:
• Determine the service contracts and base salary levels
for the executive directors and other senior
management
• Consider whether executive directors should be eligible
for annual bonuses and the performance conditions
attached thereto
• Consider whether executive directors should be eligible
for benefits under long-term incentive schemes, and
• Consider the pension consequences and associated
costs of salary increases.
Shareholder relations
The company recognises the importance of dialogue
with both institutional and private shareholders.
Presentations are made to brokers, analysts and
institutional investors at the time of the announcement
of final and interim results and there are regular
meetings with analysts and investors throughout the
year. The aim of the meetings is to explain the strategy
and performance of the group and to establish and
maintain a dialogue so that the investor community can
communicate its views to the executive management.
It is usual that Mark Lawrence and Martin Walton are
present at these meetings and that feedback reports
provided by the company’s broker are communicated to
the non-executive directors so that they can be informed
62
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Directors’ report - Corporate governance report
regarding shareholder opinion. In addition, the Chairman
is available to meet with major shareholders periodically
to discuss board governance and strategy. The Board
has always invited communication from private investors
and encouraged their participation at the Annual General
Meeting. All Board members present at the Annual
General Meeting are available to answer questions
from shareholders, as are the chairs of the Audit,
Remuneration and Nomination Committees. Notice of
the Annual General Meeting is given in accordance
with best practice and the business of the meeting is
conducted with separate resolutions, each being voted
on initially by a show of hands, with the results of the
proxy voting being provided at the meeting. Further
shareholder information is available on our website at
www.tclarke.co.uk under the Investor Relations tab.
Internal control
The Board is responsible for the group’s system of
internal control and for reviewing its effectiveness. Such
a system is designed to manage rather than eliminate
the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance
against material misstatement or loss.
The Board is of the view that there is an ongoing process
for identifying, evaluating and managing the group’s
significant risks, that it has been in place for the year
ended 31st December 2014 and, up to the date of
approval of the annual report and financial statements,
that it is regularly reviewed by the Board and accords with
the internal control guidance for directors in the Code.
Risk management and internal control procedures are
delegated to executive directors and senior management
in the group, operating within a clearly defined divisional
structure. Each division or subsidiary assesses the level
of authorisation appropriate to its decision-making
process after the evaluation of potential benefits and
risks. A three year strategic plan is prepared for each
division and updated annually, including the identification
and consideration of significant risks to the division’s
strategic objectives. Progress against the strategy and
the management of the risks identified is formally
reviewed on a quarterly basis.
On a quarterly basis the Board reviews management
accounts in order to provide effective monitoring of
financial performance. At the same time the Board
considers other significant strategic risk management,
operational and compliance issues to ensure that the
group’s assets are safeguarded and financial information
and accounting records can be relied upon. The Board
monitors monthly progress on contracts formally.
The Board’s agenda includes a regular item for
consideration of risk and control and the Board receives
reports thereon from group management. The emphasis
is on obtaining the relevant degree of assurance and not
merely reporting by exception.
At its meeting on 18th March 2015, the Board carried
out the annual assessment of the year ended 31st
December 2014 by considering documentation from the
Audit Committee and reviewing the need for an internal
audit function. It was considered unnecessary to
establish an internal audit function because the regular
site audits under the quality control procedures, together
with regular review visits by the group finance team to
the subsidiaries, provide a similar assurance that internal
control systems are being properly adhered to.
Going concern
The group had positive net cash balances at the year
end and has in place an £8 million overdraft facility.
The group draws on the overdraft facility as and when
required to meet working capital requirements. As with
all such facilities, the overdraft is subject to annual
review and is repayable on demand.
In February 2014 an additional three-year committed
£5 million Revolving Credit Facility (‘RCF’) was arranged.
The RCF was fully drawn at 31st December 2014.
The RCF imposes certain financial and other covenants
on the group, which are tested on a quarterly basis. The
group was compliant with its obligations under the RCF
at 31st December 2014, however the following breaches
and potential breaches occurred during the year:
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Further information relating to the financial position
of the group, its cash flows, liquidity position and
borrowing facilities is given in the financial review on
pages 10 to 13.
Approved by the Board
and signed on its behalf
Martin Walton
Company Secretary
24th March 2015
Directors’ report - Corporate governance report
• During the year ended 31st December 2014 the group
breached its obligations under the terms of the RCF by
failing to notify the bank in a timely manner of an
award of significant damages against the group. The
group sought and obtained a waiver of this breach
during the year.
• Also, following the settlement during the year of
a protracted final account negotiation in the group’s
Mission Critical division which resulted in the group
recognising a significant loss on the contract
concerned, the group informed the bank that it would
be unable to meet one of the financial covenant ratios
at 31st December 2014 and requested in advance a
waiver of this covenant. The terms of the RCF were
subsequently varied before the year-end to remove
this covenant test for the quarter ended 31st
December 2014.
The directors have received confirmation from the bank
that it knows of no reason why the overdraft facility will
not be renewed when it next falls due for review. There
is no other external debt apart from the RCF and finance
lease and hire purchase commitments.
The group prepares detailed three year profit, cash flow
and covenant projections, taking into account secured
work, pipeline and other opportunities, and available
resources. The projections include sensitivities to test the
resilience of the group to changes in trading volumes,
margins, interest rates and payment terms. 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.
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Directors’ report
Audit Committee report
Chairman of the Audit Committee – Iain McCusker
Robust governance is fundamental to the way TClarke
manages its business and risks. The Audit Committee
has a vital role to play in this regard by providing
detailed scrutiny over the integrity and relevance of
the group’s financial reporting, the appropriateness
of the group’s system of internal control, the suitability
of the group’s system of risk management and
overseeing the external audit process.
The Committee has an established programme of
meetings, timed to coincide with key events in the
financial calendar. Regular reports are received from
management and the external auditors. Where
necessary, the committee has requested and received
additional detailed information from management; for
instance, on material projects, so that we may discuss
the key features, risks and opportunities these present.
Our aim is to provide a proactive and constructive
challenge over the information we receive.
Over the past year the reports we have received from
management and the external auditors have been timely
and well presented, which has enabled the Committee
to discharge its responsibilities effectively.
August 2014
Iain McCusker
Chair - Audit Committee
24th March 2015
The Audit Committee is comprised of the non-executive
directors Iain McCusker (Chairman), Beverley Stewart and
(from 1st October 2014) Tony Giddings. David Henderson
also served on the audit committee from 1st January
2014 until 9th May 2014. Biographies of the members
of the Audit Committee are included on page 58.
The Audit Committee met on four occasions during
the year ended 31st December 2014. Each meeting
was attended by the external auditors,
PricewaterhouseCoopers LLP. The principal matters
discussed at each meeting are set out below:
Date
Principal matters considered
March 2014
• Draft annual report and financial statements
for the year ended 31st December 2013,
including significant judgements and
disclosures therein
•
•
•
•
•
Audit representation letter
Review of risk register and mitigating actions
Finance Director’s report on internal control
Finance Director’s report on going concern
Consideration of the need for an internal audit
function
• Draft half-year report and financial statements
for the six months ended 30th June 2014,
including significant judgements and
disclosures therein
• Going concern
October 2014
December 2014
•
•
•
•
•
Audit plan presented by the auditors
Independence of the external auditors
Approval of external auditors’ fees
Results of the interim audit
Implications of the revised 2014 UK Corporate
Governance Code (applicable for 2015
onwards).
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Significant judgements, key assumptions and estimates
The Audit Committee pays particular attention to matters it considers to be important by virtue of their impact on
the group’s results and remuneration of senior management, or the level of complexity, judgement or estimation
involved in their application on the consolidated financial statements. The main areas of focus during the year are
set out below:
Matter considered
Action
Carrying value of intangible assets
Intangible assets comprise a significant element of the group’s net assets. As required by IFRSs, the
company conducts an impairment review of these assets every year.
Contract profit and revenue recognition
Going concern
Pension scheme accounting
Non-underlying items
- claim settlement costs
The Committee considered the papers presented by the Finance Director supporting management’s
assertion that goodwill and other intangible assets were not impaired. This assertion was supported by
detailed cash flow and profit projections covering a three year period, including sensitivity analysis, and an
analysis of secured workload. It also considered the independent auditors’ comments on the key
assumptions and detailed forecasts made. The issue of impairment involves making significant judgements
about individual cash generating units and the risks they face. The Committee agreed with management’s
recommendation that no impairment charge should be made but that there remains a risk of impairment of
Waldon Electrical Contractors and TClarke South East in the future and relevant disclosures have therefore
been included in the financial statements. Further details concerning the make up of intangible assets, the
assumptions used and the sensitivity of the carrying value of intangible assets can be found in Note 11 to
the financial statements on page 116 and 117.
The recognition of revenue and profit on construction contracts involves significant judgement due to the
inherent difficulty in forecasting the final costs to be incurred on contracts in progress and the process
whereby applications are made during the course of the contract with variations, which can be substantial,
often being agreed as part of the final account negotiation.
The Committee considered the consistency and appropriateness of the group’s policies in respect of profit
and revenue recognition during the year, and their specific application to a number of contracts.
In particular, at its March and August meetings, the Committee considered the accounting treatment of a
major contract in the Mission Critical division where final account negotiations were being frustrated by the
actions of the principal contractor and significant amounts remained outstanding. The Committee concurred
with management’s assessment of the contract and the revenue recognized at those times.
The Committee reviewed papers presented by the Finance Director on the group’s viability as a going
concern. Discussion focused on the group’s cash flow projections, which covered a period of three years
and included key sensitivities, facility headroom and projected covenant compliance, and actual and
potential breaches in the terms of the group’s banking facilities. Where necessary, clarification of the bank’s
position was sought and appropriate disclosures made in the annual and interim reports. Given recent
history with significant claims against a subsidiary company prior to its acquisition by the group,
consideration was also given to the level of insurance cover the group has in place.
discount rates;
The group’s defined benefit pension scheme is valued annually by external advisers in accordance with
IFRSs. The valuation is subject to significant fluctuations based on actuarial assumptions, including:
•
• mortality assumptions;
•
•
•
inflation;
salary increases; and
expected return on plan assets.
The Committee reviewed the basis of the valuation, including the assumptions used, and considered the
sensitivity of the pensions scheme valuation to changes in those key assumptions. Further details of the
valuation, including the key assumptions used, are disclosed in Note 23 to the financial statements on
pages 134 to 138.
The Committee considered the quantification, disclosure and presentation in the financial statements of
amounts arising in respect of exceptional claim settlement costs. The Committee concurred with the
accounting for these costs and considered the disclosures in the financial statement appropriately described
the issues arising, including the potential for any further liabilities. Further details are disclosed in Note 27
on page 111.
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Directors’ report - Audit Committee report/Nominations Committee report
Nominations
Committee report
Chairman of the Nominations Committee – Iain McCusker
The Nominations Committee comprises Iain McCusker
(Chair), Beverley Stewart, David Henderson and, from
1st October 2014, Tony Giddings. Biographies of the
members of the Nominations Committee are included on
page 58. The Chair of the Committee, Iain McCusker, is
an independent non-executive director.
The Nominations Committee met twice during the year
to consider candidates to be recommended to join the
Board. The Committee gives due consideration to
diversification in the make up of the Board, but due to
the size of the company and Board the most important
consideration is to achieve an appropriate mix of skills,
knowledge and experience. The Committee interviewed
two candidates for the role of non-executive director and
recommended the appointment of Tony Giddings as an
additional non-executive director. The committee also
recommended the appointment of Danny Robson as an
additional executive director with effect from 1st January
2015.
Iain McCusker
Chair - Nominations Committee
24th March 2015
Internal control assessment
and internal audit
The Audit Committee has reviewed arrangements by
which staff of the company may, in confidence, raise
concerns. At its meeting on 18th March 2015 the Audit
Committee carried out its formal review of the internal
controls and risk management processes in place during
the year and considered the need for an Internal Audit
function. The Audit Committee concluded that, based on
presentations received from management concerning the
operation of internal controls and risk management
procedures during the year, there is no need at present
to instigate a formal internal audit process.
External audit
The Audit Committee is responsible for overseeing
relations with the external auditors, including the
approval of fees, and makes recommendations to the
Board on their appointment and reappointment. Details
of the auditors’ remuneration can be found in Note 7
to the financial statements on page 111. The auditors
fees for non-audit services during the year were £38,000
(2013: £nil).
The independence of the external auditors is essential to
the provision of an objective opinion on the true and fair
view presented in the financial statements. Auditor
independence and objectivity is safeguarded by limiting
the nature and value of non-audit services performed by
the external auditors, ensuring that employees of the
external auditors who have worked on the audit in the
past two years are not appointed to senior financial
positions in the company, and ensuring the rotation of
the lead engagement partner at least every five years.
The current lead engagement partner has held the
position for four years.
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Directors’ report
Remuneration Committee report
Chairman of the Remuneration Committee – Beverley Stewart
Annual Statement
Dear Shareholder
The Remuneration Committee is focused on ensuring that
our policies and procedures are right for our business and
are capable of driving and incentivising our executives to
create long-term value for our shareholders. The focus of
the executives this year has been on further strengthening
the organisation, resolving contractual issues from
previous years, and ensuring effective execution of our
strategy in readiness for future economic growth.
Pay for performance
We believe in rewarding our executives based on their
performance and on the value created for our
shareholders. The variable elements of executive
remuneration are focused on simple and transparent
measures of profit before tax, EPS growth and key
strategic objectives. Our bonus and long-term incentive
structures are based on challenging targets, which we
believe are in line with market best practice. These are
outlined on pages 73 and 75.
Our executives have shown great resolve and commitment
in overcoming some challenging issues in 2014. However,
the underlying performance of the group has meant that
performance targets were not met and no bonuses are
payable in respect of the year.
The minimum vesting conditions for our 2012 LTIP award,
which is based on earnings per share growth, were not
met, once again demonstrating the challenging targets we
set as a business.
Clarity and openness in disclosure
The committee strives to operate and demonstrate best
practice in the area of executive remuneration and
disclosure. We trust that our report demonstrates
transparency and clarity in our disclosures.
Our report has three sections as follows: this Annual
Statement, which summarises and explains the major
decisions and changes in respect of directors’
remuneration; a Directors’ Remuneration Policy setting out
the forward-looking remuneration policy for the company’s
directors, which was approved at the AGM on 9th May
2014; and an Annual Report on Remuneration, providing
details of how the policy for 2015 will be operated and the
remuneration earned by the company’s directors in
relation to the year ended 31st December 2014.
At the forthcoming AGM on 8th May 2015, the Annual
Report on Remuneration will be subject to an advisory
shareholder vote. The Directors’ Remuneration Policy is
subject to a binding vote every three years (sooner if
changes are made to the policy), with the next vote being
due in 2017.
Remuneration policy for 2015
The Remuneration Committee took advice from its
solicitors, Pinsent Masons LLP, in connection with the
terms of service contracts for executive directors and
matters concerning other members of senior management,
and had previously taken advice from BDO LLP concerning
the level and structure of executive remuneration
packages. The committee’s most recent conclusions are
that the existing senior executive remuneration policy
remains appropriate and should continue to operate for
2015 without major changes.
Consideration of employment conditions
elsewhere in the group
The Committee considers the general basic salary increase
for the broader employee population when determining
the annual salary increases and remuneration for the
executive directors. Employees have not been consulted in
respect of the design of the company’s senior executive
remuneration policy to date, although the committee will
keep this under review.
Alignment with shareholders
We are mindful of our shareholders’ interests and are keen
to ensure a demonstrable link between reward and value
creation.
We are very proud of the support we have received in the
past from our shareholders, with 98.7% approval of the
remuneration policy and 99.21% approval of the
remuneration report received last year.
We hope that we will continue to receive your support at
the forthcoming AGM.
Beverley Stewart
Chair - Remuneration Committee
24th March 2015
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Directors’ report - Remuneration Committee report
Directors’ remuneration policy
In formulating the remuneration policy, full consideration
has been given to the principles set out in the Code and
the committee regularly reviews the policy to ensure it
takes due account of best practice and the particular
circumstances of the company.
Specifically, the committee concluded that:
• Basic salary levels remain appropriately positioned in
the market, noting that they sit in the median range
compared with similar companies;
• The structure and quantum of the annual bonus
continues to be appropriate and aligned to
shareholders’ interests; and
• The long-term incentive plan policy, whereby
conditional shares and options are granted annually
with vesting over a three year period based on earnings
per share growth conditions, provide a strong
alignment between the senior executive team and
shareholders.
The Directors’ Remuneration Policy Report was approved
by a binding shareholder vote at the AGM on 9th May
2014 and will be in operation until the 2017 AGM.
Policy overview
The Remuneration Committee regularly reviews the
senior executive remuneration policy to ensure it
promotes the attraction, motivation and retention of the
high quality executives who have been key to delivering
the company’s strategy in the past and who will be key
to delivering sustainable earnings growth and
shareholder return in the future.
The company aims to provide a remuneration structure
that is aligned with shareholder interests and, as such,
is competitive in the marketplace to attract, retain and
motivate executive directors of superior calibre in order
to deliver continued growth of the business. Company
policy is that performance related components should
form a significant portion of the overall remuneration
package, with maximum total potential rewards being
earned through the achievement of challenging
performance targets based on measures that represent
the best interests of shareholders.
Consideration of shareholder views
The Remuneration Committee considers shareholder
feedback received in relation to the Annual General
Meeting. This feedback, plus any additional feedback
received during any meetings from time to time, is then
considered as part of the company’s annual review of
remuneration policy. In addition, the Remuneration
Committee will seek to engage directly with major
shareholders and their representative bodies should any
material changes be made to the remuneration policy.
Summary remuneration policy
The table overleaf summarises the directors’
remuneration policy for 2014 onwards:
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Annual Report & financial statements 2014
Purpose and link to strategy
Operation
Maximum
Performance targets
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Directors’ report - Remuneration Committee report
Element of
remuneration
Salary
To provide competitive
fixed remuneration to attract
and retain executive directors
of superior calibre in order to
deliver growth for the business
Intended to reflect that
paid to senior management
of comparable companies
Benefits
Bonus
To provide market consistent
benefits, including insured
benefits to support the
individual and their family
during periods of ill health,
accidents or death and car
or car allowances to facilitate
effective travel
Incentivises annual
achievement of performance
targets. Maximum bonus
only payable for achieving
demanding targets
Non-
executive
director
fees
Reflects time commitments
and responsibilities of each
role
Reflects fees paid by similarly
sized companies
The basic salary for each
executive director is reviewed
annually by the Remuneration
Committee. Individual salary
adjustments take into account
each executive director's
performance against agreed
challenging objectives and
the group's financial
circumstances, as well as
comparing each executive
director's basic salary to senior
management in the group and
relative to the external market
Current benefit provision
includes a company car or car
allowance and private medical
insurance
Other benefits may be payable
where appropriate
Not pensionable
Profit related bonuses in
excess of 100% of basic salary
are paid in TClarke shares
Strategic Target Bonuses are
paid in cash providing targets
are met and certain profit
thresholds are crossed
Cash fee paid
Fees are reviewed on an
annual basis
No fees are payable for any
membership of board
committees
Not applicable
There is no prescribed
maximum annual increase.
The Committee is guided
by RPI and the general
increase for the broader
employee population but on
occasions may need to
recognise, for example, an
increase in the scale, scope
or responsibility of the role.
Current salary levels are set
out on page 74
There is no prescribed
maximum but the percentage
increase is not expected to rise
significantly in excess of the
basic salary increase
Not applicable
Profit Related - Paid in cash
up to 100% of salary
Up to 100% of salary
Up to 50% of salary
Up to 50% of salary
Targets are set for underlying
profit before tax, and bonuses
are paid on a sliding scale
according to how the group
performs against targets
The bonus for strategic
targets is payable only if,
in the opinion of the
Remuneration Committee,
the targets are met
As per executive directors,
there is no prescribed
maximum annual increase
Non-executive directors do
not participate in variable pay
arrangements
The committee is guided by
the general increase in the
non-executive director market
and for the broader employee
population but on occasions
may need to recognise, for
example, an increase in the
scale, scope or responsibility
of the role. Current fee levels
are set out on page 75
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Purpose and link to strategy
Operation
Maximum
Performance targets
Element of
remuneration
Long-Term
Incentive
Plan
Designed to align with
both the strategic
objectives of delivering
sustainable earnings
growth and the interests
of shareholders
All
employee
share plans
To encourage employee share
ownership and therefore
increase alignment with
shareholders.
The SAYE Scheme was
approved by shareholders
on 13th May 2011 and was
approved by HMRC on 14th
July 2011
Awards normally vest three
years from grant, subject to
performance targets and
continued service
Participants will normally have
a seven year period from the
date each tranche vests in
which to exercise nil cost
options
Sharesave Plan: HMRC
approved plan under which
regular monthly savings are
made over a three year period
and can be used to fund the
exercise of an option, where
the exercise price is discounted
by up to 10%. Provides tax
advantages to UK employees
Aggregate value of shares over
which options are granted and
conditional share awards shall
not exceed 100% of basic
salary in any one year
LTIP performance measured
over three years based on
annualised EPS growth in
excess of RPI as follows:
nil
<3%
25% award
3%
25-100%
3-10%
on a straight line basis
>10%
100%
Not applicable
Maximum permitted
savings of £500 per month
across all ongoing Sharesave
contracts in line with HMRC
limits
Share
ownership
guidelines
To increase alignment
between executives and
shareholders
All directors are required to
hold at least 2,000 TClarke
shares
Not applicable
Not applicable
Pension
To provide retirement
benefits
Defined benefit or defined
contribution scheme. Where
the promised levels of benefits
cannot be provided through an
appropriate pension scheme,
the group may provide
benefits through the provision
of salary supplements
Defined benefit
contribution in line with rates
approved by the scheme
actuary for all members,
currently 20.7%
Not applicable
Notes
1. A description of how the company intends to implement the policy set
out in this table for 2015 is set out in the Annual Report on Remuneration
on page 68.
2. The following differences exist between the company’s policy for the
remuneration of executive directors as set out above and its approach to
the payment of employees generally:
• A lower level of maximum annual bonus opportunity (or zero bonus
opportunity) may apply to employees other than the executive directors and
certain senior executives
• Benefits offered to other employees generally comprise provision of
healthcare and company car benefits where required for the role or to meet
market norms
• The majority of employees participate in local defined contribution pension
arrangements or in industry wide pension schemes. Staff and senior
management in certain subsidiaries are able to participate in the TClarke
Group Retirement and Death Benefits Scheme
• Participation in the LTIP is open to all members of senior management
at the Remunerations Committee’s discretion, but at present membership is
limited to the executive directors.
In general, these differences arise from the development of remuneration
arrangements that are market competitive for the various categories of
individuals. They also reflect the fact that, in the case of the executive
directors and senior executives, a greater emphasis tends to be placed on
performance related pay.
3. The choice of the performance metrics applicable to the annual bonus
scheme reflect the Committee’s belief that any incentive compensation
should be appropriately challenging and tied to both the delivery of profit
growth and specific individual objectives.
4. The EPS performance conditions applicable to the LTIP (further details
of which are provided on page 75) were selected by the Remuneration
Committee on the basis that they reward the delivery of long-term returns
to shareholders and the group’s financial growth and are consistent with
the company’s objective of delivering superior levels of long-term value to
shareholders. The group’s EPS growth is derived from the audited financial
statements.
5. The Committee operates share plans in accordance with their respective
rules and in accordance with the Listing Rules and HMRC where relevant.
The Committee, consistent with market practice, retains discretion over a
number of areas relating to the operation and administration of certain
plans.
6. All employee share plans (SAYE) do not operate performance conditions.
7. As highlighted above, the company has a share ownership policy
which requires all directors to hold at least 2,000 10p ordinary shares, in
accordance with the Articles of Association. Details of the extent to which
the directors had complied with this policy as at 31st December are set out
on page 77.
8. For the avoidance of doubt, in approving this Directors’ Remuneration
Policy, authority is given to the company to honour any commitments
entered into with current or former directors (such as the payment of
a pension or the vesting/exercise of past share awards). Details of any
payments to former directors will be set out in the Annual Report on
Remuneration as they arise.
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Illustrations of application of remuneration policy
The chart below illustrates how the composition of the executive directors’ remuneration packages varies at
different levels of performance under the 2014 policy, both as a percentage of total remuneration opportunity and
as a total value:
Maximum
£000s
900
800
700
600
500
400
300
200
100
0
Mark Lawrence
Mike Crowder
Martin Walton
Danny Robson
LTIP (nil, Note 4)
Annual bonus
Fixed pay
324
392
17%
865
63%
752
63%
282
340
17%
100%
83%
37%
100%
83%
37%
652
62%
38%
647
62%
38%
244
100%
294
17%
83%
249
100%
299
17%
83%
Fixed pay
In line with
expectations
M axim u m
Fixed pay
In line with
expectations
M axim u m
Fixed pay
In line with
expectations
M axim u m
Fixed pay
In line with
expectations
M axim u m
Notes 1. The value of benefits receivable in 2014 is taken to be the value of benefits received in 2014
(as calculated under the Directors’ Remuneration table, set out on page 75). Danny Robson’s
benefits receivable have been adjusted to reflect benefits to which he is entitled as a director.
2. The value of pension is presented on the same basis as under the Directors' Remuneration table on page 75.
3. The on-target level of bonus assumes the group's internal budgets are met.
4. Performance targets for LTIP shares vesting in 2015 have not been met, therefore the maximum vesting in 2015 is nil.
Service contracts for executive directors
The service contracts for the executive directors are renewed each year as at 31st December and are terminable
by either party with 12 months’ notice. There is no specific provision for any compensation upon early termination of
the contract.
Incidental expenses may also be payable where appropriate. In calculating the amount payable to a director on
termination of employment, the board would take into account the commercial interests of the company. The
Remuneration Committee reviews the contractual terms for new executive directors to ensure these reflect best practice.
Provision
Notice period
Detailed terms
12 months
Termination payment
Up to 12 months’ salary
Remuneration entitlements
A bonus may be payable (pro-rated where relevant) and outstanding share awards may vest
Change of control
No executive director’s contract contains additional provisions in respect of change of control
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Approach to recruitment and promotions
The remuneration package for a new executive director
- ie basic salary, benefits, pension, annual bonus and
long-term incentive awards - is set in accordance with
the terms of the company’s prevailing approved
remuneration policy at the time of appointment and
reflects the experience of the individual. The salary for
a new executive director may be set below the normal
rate, with phased increases over the first few years, as
the executive director gains experience in their new role.
In addition, the committee may offer additional cash
and/or share-based elements when it considers these
to be in the best interests of the company (and
therefore shareholders) to take account of remuneration
relinquished when leaving the former employer and
would, where possible, reflect the nature, time horizons
and performance requirements attaching to that
remuneration. Shareholders will be informed of any
such payments at the time of appointment.
For an internal executive director appointment, any
variable pay element awarded in respect of the prior
role may be allowed to pay out according to its terms.
In addition, any other ongoing remuneration obligations
existing prior to appointment may continue, provided
that they are put to shareholders for approval at the
earliest opportunity. This may be awarded in addition
to ongoing participation in the bonus and long-term
incentive awards under the approved policy.
For external and internal appointments, the committee
may agree that the company will meet certain relocation
and/or incidental expenses as appropriate.
Approach to leavers
An annual bonus may be payable with respect to the
period of the financial year served although it will be
pro-rated for time and paid at the normal payout date.
Any share-based entitlements granted to an executive
director under the company’s share plans will be
determined based on the relevant plan rules. The default
treatment under the LTIP is that any outstanding awards
lapse on cessation of employment. However, in certain
prescribed circumstances, such as death, ill health,
disability, retirement or other circumstances at the
discretion of the committee, ‘good leaver’ status may be
applied. For good leavers, awards will normally vest on
cessation, subject to the satisfaction of the relevant
performance conditions at that time and reduced pro-
rata to reflect the proportion of the performance period
actually served.
However, the Remuneration Committee has discretion
to determine that awards vest at a later date and/or
to disapply time pro-rating. The default treatment for
deferred bonus awards is that any outstanding awards
lapse on cessation of employment. However, in certain
‘good leaver’ circumstances (as described under the
LTIP), awards will normally vest in full on the date
of cessation (unless the Remuneration Committee
determines otherwise).
Non-executive directors
Non-executive directors are appointed under
arrangements that may generally be terminated by either
party without compensation and their appointment is
generally for a three year period.
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Annual report on remuneration
Implementation of the remuneration policy
for the year ending 31st December 2015
A summary of how the Directors’ Remuneration Policy will
be applied during the year ending 31st December 2015 is
set out below.
Basic salary
2015 increases are shown below and reflect inflationary
pressures being felt throughout the industry due to
increasing demand for resources.
The group’s employees are, in general, receiving pay rises
ranging from 2.5% to 10% depending on promotional
increases and individual performance. The average
increase across the business is 3%.
Director
2015
2014 % increase
Mark Lawrence
Mike Crowder
Martin Walton
Danny Robson1
£270,500
£231,000
£201,500
£201,500
£246,000
£210,000
£183,000
–
10.0%
10.0%
10.1%
–
Notes 1Danny Robson was appointed to the board
on 1st January 2015
Pension arrangements
The company operates a defined benefit pension and
death benefits scheme (see Note 23 to the financial
statements) of which all the executive directors are
members. The company contribution during 2014 was
18% (2013: 16%) and the individual directors contributed
8% (2013: 8%). From 1st January 2015, the company’s
contribution increases to 20.7%, in line with the scheme
actuary’s recommendations for all scheme members. Until
31st December 2008, averaged bonuses were included in
pensionable salary under the rules of the scheme, but the
rules changed with effect from 1st January 2009 to
exclude executive directors’ bonuses from pensionable
salary, in line with best practice. Details of the accrued
pension benefits are shown in the table on page 77. The
life assurance benefit is 2.25 times pensionable salary,
rising to four times pensionable salary after five years’
service with the group.
Where the promised levels of benefits cannot be provided
through the appropriate scheme, the group can continue
to provide benefits through the provision of salary
supplements.
Annual bonus
The maximum bonus potential for the year ending
31st December 2015 is 200% of salary for all the
executive directors.
Awards are determined based on a combination of both
the group’s financial results being growth in group profit
before tax, and strategic targets being met.
Maximum bonus will only be payable when both the
financial results of the group have significantly exceeded
expectations and all strategic targets have been met.
Bonus targets will only be amended during the course
of the year if, in the opinion of the Remuneration
Committee, there is a significant change in the structure
of the group.
Bonus make up as % of basic salary
Strategic up to
50% of salary
payable in CASH
Profit related bonus;
up to 100% of
salary payable
in CASH
Profit related
bonus up to 50%
of salary payable in
SHARES
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Long-term incentives
Consistent with past awards, LTIP awards that will be granted in 2015 will vest subject to continued employment
with the group and satisfaction of the following performance conditions over a three year period ending on the
31st December preceding the earliest vesting date:
Annual growth in EPS above RPI
Proportion of award vesting
Less than 3%
3%
Between 3% and 10%
Above 10%
Nil
25%
Between 25% and 100% on a straight line basis
100%
Non-executive directors
The company’s approach to non-executive directors’ remuneration is set by the board with account taken of the
time and responsibility involved in each role. No additional fees are paid in respect of membership of any board
committees. A summary of current fees is shown in the table below.
Non-executive directors
Notes
Russell Race
David Henderson
Iain McCusker
Beverley Stewart
Tony Giddings
1
2
3
2015
–
£49,500
£45,000
£45,000
£45,000
2014
£18,750
£42,617
£40,000
£40,000
£10,000
% increase
-100%
16.2%
12.5%
12.5%
12.5%
Notes 1. Russell Race did not seek re-election at the AGM on 9th May 2014 and stepped down from the Board on that date.
2. David Henderson was appointed Chairman following the Annual General Meeting on 9th May 2014.
3. Tony Giddings was appointed to the Board on 1st October 2014.
Directors’ remuneration for the year ended 31st December 2014
The directors’ remuneration for the year ended 31st December 2014 is set out in the table below
Directors’ remuneration for the year ended 31st December 2014 was as follows:
£000s
Executive
Mark Lawrence
Mike Crowder
Martin Walton
Non-executive
Russell Race
David Henderson
Iain McCusker
Beverley Stewart
Tony Giddings
Total
Notes
Fees & Salary Benefits (Note 4) Bonus (Note 5)
2013
2014
2014
2014
2013
2013
LTIP (Note 6) Pension (Note 7)
2014
2014
2013
2013
246
210
183
19
43
40
40
10
791
234
199
174
43
–
38
38
–
726
1
2
3
18
16
16
–
–
–
–
–
50
15
13
11
–
–
–
–
–
39
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36
30
32
–
–
–
–
–
98
30
25
48
–
–
–
–
–
103
Total
2014
2013
300
256
231
19
43
40
40
10
939
279
237
233
43
–
38
38
–
868
Notes 1. Russell Race did not seek re-election at the Annual General Meeting on 9th May 2014 and stepped down from the Board on that date.
2. David Henderson joined the Board on 1st January 2014 and became Chairman following the Annual General Meeting on 9th May 2014.
3. Tony Giddings joined the Board on 1st October 2014.
4. Benefits comprise a car or car allowance and private medical insurance.
5. Payment of annual bonuses earned in 2013 totalling £76,000 were waived by the executive directors.
6. No LTIP awards vested in 2014 or 2013.
7. Pensions are calculated based on HMRC's pension input method.
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Directors’ interests in the TClarke Equity Incentive Plan (audited)
The directors’ interests over shares as a result of their participation in the TClarke Equity Incentive Plan
are as follows:
Directors’ interests in the TClarke Equity Incentive Plan
Executive director
Mark Lawrence
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Options
Options
Mike Crowder
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Options
Options
Martin Walton
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Options
Options
Award 01/01/2014
number
date
Granted
Lapsed
31/12/2014
number
Exercise
price
Earliest date
of exercise
Date of
expiry
16/06/2011
01/05/2012
30/04/2013
29/04/2014
01/05/2012
30/04/2013
16/06/2011
01/05/2012
30/04/2013
29/04/2014
01/05/2012
30/04/2013
16/06/2011
01/05/2012
30/04/2013
29/04/2014
01/05/2012
30/04/2013
85,000
115,000
115,000
–
59,000
59,000
85,000
115,000
115,000
–
59,000
59,000
85,000
115,000
115,000
–
59,000
59,000
–
–
–
85,000
–
–
–
–
–
85,000
–
–
–
–
–
85,000
–
–
85,000
–
–
–
–
–
85,000
–
–
–
–
–
85,000
–
–
–
–
–
–
115,000
115,000
85,000
59,000
59,000
–
115,000
115,000
85,000
59,000
59,000
–
115,000
115,000
85,000
59,000
59,000
–
–
–
–
50.25p
52.00p
–
–
–
–
50.25p
52.00p
–
–
–
–
50.25p
52.00p
–
01/05/2015
30/04/2016
01/05/2015
30/04/2016
29/04/2017
–
01/05/2015
30/04/2016
01/05/2015
30/04/2016
29/04/2017
–
01/05/2015
30/04/2016
01/05/2015
30/04/2016
29/04/2017
01/05/2022
30/04/2023
29/04/2024
01/05/2022
30/04/2023
29/04/2024
01/05/2022
30/04/2023
29/04/2024
The conditional share awards and options will vest subject to continued employment with the group and satisfaction of
the following performance conditions over a three year period ending 31st December preceding the earliest vesting date:
Annual growth in EPS above RPI
Proportion of award vesting
Less than 3%
3%
Between 3% and 10%
Above 10%
Nil
25%
Between 25% and 100% on a straight line basis
100%
Directors’ interests in the TClarke Savings Related Share Option Scheme (“SAYE Scheme”) (audited)
The following options were outstanding during the year:
Directors’ interests in the TClarke Savings Related Share Option Scheme (“SAYE Scheme”)
Executive director
Mark Lawrence
Mike Crowder
Martin Walton
Award 01/01/2014
number
6,750
12,857
1,666
6,750
12,857
1,666
6,750
12,857
1,666
date
08/11/2011
12/10/2012
11/10/2013
08/11/2011
12/10/2012
11/10/2013
08/11/2011
12/10/2012
11/10/2013
Granted
–
–
–
–
–
–
–
–
–
Lapsed
–
–
–
–
–
–
–
–
–
31/12/2014
number
6,750
12,857
1,666
6,750
12,857
1,666
6,750
12,857
1,666
Exercise
price
40.00p
42.00p
54.00p
40.00p
42.00p
54.00p
40.00p
42.00p
54.00p
Earliest date
of exercise
01/01/2015
01/01/2016
01/01/2017
01/01/2015
01/01/2016
01/01/2017
01/01/2015
01/01/2016
01/01/2017
Date of
expiry
30/06/2015
30/06/2016
30/06/2017
30/06/2015
30/06/2016
30/06/2017
30/06/2015
30/06/2016
30/06/2017
No options were exercised during the year. The market price of a 10p ordinary share on 31st December 2014 was
56.33p and the range during the year ended 31st December 2014 was 37.50p to 88.56p.
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Pension scheme (audited)
Details of the accrued pension benefits that the executive directors would be entitled to on leaving service
are as follows:
Audited details of the accrued pension benefits that the directors’ would be entitled to on leaving service:
Total pension
accrued at
31.12.13
£ p.a.
54,063
55,668
12,879
Increase in
accrued
pension
(including
inflation)
£ p.a.
3,625
3,211
2,483
Increase in
accrued
pension
(excluding
inflation)
£ p.a.
2,760
2,321
2,277
Total pension
accrued at
31.12.14
£ p.a.
57,688
58,879
15,362
Transfer
value
of accrued
pension at
31.12.13
£
1,081,260
1,113,360
257,580
Increase in
transfer
value less
director’s
contributions
£
36,212
30,298
31,581
Transfer
value
of accrued
pension at
31.12.14
£
1,153,764
1,177,584
307,234
Mark Lawrence
Mike Crowder
Martin Walton
Inflationary increases were assumed to be 1.6% per annum during 2014 in line with increases in the Consumer Price Index during the year
Payments to past directors (audited)
No payments were made to past directors.
Payments for loss of office (audited)
No payments were made in respect of loss of office during the year ended 31st December 2014.
Directors’ interests
Directors’ interests in the issued share capital of TClarke plc are set out below.
The directors’ interest in share options and conditional shares under long-term incentive schemes are set out
on page 76.
Beneficial interests
Notes
Directors’ interests in the issued share capital of TClarke plc are:
1/1/2014
–
20,000
12,000
10,000
–
2,000
21,000
–
David Henderson
Mark Lawrence
Mike Crowder
Martin Walton
Danny Robson
Iain McCusker
Beverley Stewart
Tony Giddings
1
2
31/12/2014
23,000
20,000
12,000
10,000
–
2,000
21,000
2,000
24/03/2015
23,000
26,750
18,750
16,750
1,451,906
2,000
21,000
2,000
Notes 1. Danny Robson joined the Board on 1st January 2015
2. Tony Giddings joined the Board on 1st October 2014
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Performance graph
The graph shows the total shareholder return that would have been obtained over the past five years by investing
£100 in shares of TClarke plc on 31st December 2009 and £100 in a notional investment in the FTSE All-Share Index
and the FTSE All-Small Construction and Building Materials Index on the same date. In all cases it has been assumed
that all income has been reinvested. The FTSE All-Share Index and the FTSE All-Small Construction and Building
Materials Index are considered to be the most appropriate broad equity indices to use as a comparison because the
company is a constituent of both.
Total shareholder return 2008-2013
250
200
150
100
50
0
2009
2010
2011
2012
2013
2014
FTSE All-Small
Construction and
Building Materials Index
FTSE All-Share Index
TClarke plc
Total remuneration
The total remuneration figures for the Chief Executive during each of the last five financial years are shown in the
table below. The total remuneration figure includes the annual bonus based on that year’s performance and LTIP
awards based on three year performance periods ending in the relevant year. The annual bonus payout and LTIP
vesting level as a percentage of the maximum opportunity are also shown for each of these years.
Total remuneration
Annual bonus (%)
LTIP vesting (%)
2010
234
0%
0%
2011
231
0%
0%
2012
234
0%
0%
2013
245
0%
0%
2014
266
0%
0%
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Percentage change in Chief Executive’s
remuneration
The table below shows the percentage change in the
Chief Executive’s salary, benefits and annual bonus
between the financial year ended 31st December 2013
and 31st December 2014, compared with that of the
total amounts for all UK employees of the group for each
of these elements of pay.
Consideration by the directors of matters
relating to directors’ remuneration
The company’s approach to the Chairman’s and
executive directors’ remuneration is determined by the
Board on the advice of the Remuneration Committee.
The members of the Remuneration Committee (all of
whom were independent non-executive directors) during
the year under review were as follows:
Salary
Chief Executive
UK employee average
Benefits
Chief executive
UK employee average
Annual bonus
Chief executive
UK employee average
2014
2013 % change
246
40
18
1
–
–
234
38
15
1
–
–
5.1%
7.9%
20%
-100%
0%
100.0%
Average number of UK employees
1,237
1,200
Relative importance of spend on pay
The following table shows the group’s total spend on pay
relative to dividends and total operating expenses.
• Beverley Stewart (Chair)
• Iain McCusker
• Tony Giddings (from 1st October 2014)
• David Henderson
Biographical information on the committee members and
details of attendance at the committee’s meetings during
the year are set out on pages 58 and 61.
The Remuneration Committee has access to independent
advice where it considers it appropriate. During the year
the committee took advice from its solicitors, Pinsent
Masons LLP, in connection with the terms of service
contracts for executive directors and matters concerning
other members of senior management.
Staff costs
Dividend
Total operating expenses
2014
56.3
1.1
226.0
2013 % change
8.5%
51.9
-8.4%
1.2
5.6%
214.0
The Committee has considered any potential conflicts of
interest and has decided that there are none. It will
continue to monitor the position.
Total operating expenses comprise cost of sales and
administrative expenses before amortisation of goodwill
and non-recurring costs.
Statement of voting at Annual General Meeting
At last year’s AGM, the Directors’ Remuneration Report
received the following votes from shareholders:
2014 AGM
Votes cast in favour
Votes cast against
Total votes cast
Abstentions
Directors’ Remuneration report
%
99.21
0.79
Number
12,128,877
96,776
12,225,653
23,605
Directors’ Remuneration Policy
%
98.70
1.30
Number
12,064,094
158,665
12,222,759
26,499
By order of the Board
Beverley Stewart
Chair - Remuneration Committee
24th March 2015
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Directors’ report
Other disclosures
Matters dealt with elsewhere
in the annual report
The following matters are dealt with in the Strategic
Report on pages 6 to 57:
• Review of the business and likely future developments
(pages 6 to 13)
• Employees (pages 55 to 57)
• Principal risks and uncertainties (pages 32 to 34)
• Greenhouse gas emissions (page 57)
In accordance with UK Financial Conduct Authority
Listing Rules (LR9.8.40) the information to be included
in the annual report and financial statements where
applicable, under LR9.8.4, is set out in the Director’s
report, with the exception of long-term incentive
schemes which are set out in Note 19 to the financial
statements on page 129.
Results for the year
The results for the year are set out in the Consolidated
income statement on page 90.
Dividends
The directors recommend the payment of a final
dividend for the year of 2.60p per share, which together
with the interim dividend of 0.50p paid on 10th October
2014, makes a total distribution of 3.10p for the year
(2013: 3.10p).
Subject to approval at the Annual General Meeting,
the final dividend will be paid on 15th May 2015 to
shareholders on the register at 17th April 2015. The
shares will go ex-dividend on 16th April 2015.
A dividend reinvestment plan (‘DRIP’) 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 2014 final payment, may do so by
contacting Capita Registrars on 0871 664 0300 (lines are
open 8:30 am - 5:30 pm Monday to Friday. Calls cost
10p per minute plus network charges). The last day for
election for the final dividend reinvestment is 20th April
2015 and any request should be made in good time
ahead of that date.
Research and development
The group undertakes research and development activity
in creating innovative design and construction solutions
integral to the delivery of its projects. The direct
expenditure incurred is not separately identifiable as
the investment is usually contained within the relevant
project.
Donations
The group made no political donations during the year
(2013: £nil).
Post balance sheet events
There were no post balance sheet events requiring
disclosure in the annual report and financial statements.
Financial instruments
Details of the financial risk management objectives
and policies of the group, together with its exposure
to material financial risk, are set out in Note 27 to the
financial statements.
Significant interests
Save for interests in service agreements, none of which
extend beyond 12 calendar months, the directors have
no material interest in any contract of significance that
would have required disclosure under the continuing
obligations of the Financial Conduct Authority Listing
Rules, nor have they any beneficial interest in the issued
share capital of the subsidiary companies.
Substantial shareholdings
At 24th March 2015 the company had been advised of
the following substantial interests of 3% or more in its
issued ordinary share capital:
Substantial shareholdings
Miton Capital Partners
JP Morgan Asset Management
Barclays Stockbrokers
Henderson Global Investors
TD Waterhouse
Hargreaves Lansdown Stockbrokers
Walker Crips Stockbrokers
Chelverton Assey Management
Mr D.G. Robson
% of issued
ordinary share capital
11.88%
9.84%
5.51%
4.84%
4.65%
4.24%
4.18%
3.59%
3.47%
Number
of shares
4,967,611
4,118,000
2,303,721
2,022,502
1,946,499
1,772,497
1,749,426
1,500,000
1,451,906
Qualifying third party indemnities
The articles of association of the Company entitle the
directors, to the extent permitted by the Companies
Act 2006 and other applicable legislation, to be
indemnified out of the assets of the company in the
event that they suffer any expenses in connection with
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Directors’ report - Other disclosures
certain proceedings relating to the execution of their
duties as directors of the company.
In addition the company has in place insurance in favour
of its directors and officers in respect of certain losses or
liabilities to which they may be exposed due to their
office up to a limit of £10 million.
Special resolutions
Details of special resolutions to be considered at the
forthcoming Annual General Meeting are given in the
notice to the Annual General Meeting.
Stock exchange transactions
Members are advised that trading in the company’s
shares is conducted via the Stock Exchange SETS
service. For further information we would refer you to
our corporate broker N+1 Singer (020 3201 3710). The
daily price of the company’s shares continues to be listed
in the Financial Times under the construction and
building materials sector, and on our website
www.tclarke.co.uk.
Disclosure of information to auditors
As far as each director who is in office at the time when
the directors’ report is approved is aware, there is no
relevant audit information of which the auditors are
unaware and each such director has taken all reasonable
steps to make themselves aware of any relevant audit
information and to establish that the auditors are aware
of that information.
Company status
So far as the directors are aware, the company is not a
close company.
Takeover directive disclosures
As a result of the implementation of the Takeovers
Directive into UK law, disclosures are required of public
companies that have securities carrying voting rights
trading on a regulated market at the end of the
reporting year. The following disclosures are relevant to
TClarke plc and required by law, irrespective of whether
a bid is contemplated.
• The company’s capital comprises ordinary shares of
10p each. Further details are shown in Note 19 to the
financial statements.
• There are no restrictions on the transfer of shares or
on voting rights.
• Details of each person with a significant direct or
indirect holding of shares and the size of the holding
are shown in the table 'Substantial shareholdings’, on
page 81.
• The company has rules regarding the appointment of
directors with regard to their election at the first
Annual General Meeting, which are detailed in the
section on Corporate governance on pages 60 to 64.
• The Articles of Association state that a maximum of 12
directors may sit on the Board of the company.
• There are no specific rules relating to the replacement
of directors.
• The directors have shareholder approval for the issue
of ordinary share capital up to a maximum amount of
£817,042.
• The directors have shareholder approval for the
buyback of ordinary shares up to a maximum
aggregate of 10% of the issued ordinary share capital.
• The company has in place an employee share save
scheme.
• The company has in place an Equity Incentive Plan for
directors and senior management. The rules of the
scheme provide that awards made under the Equity
Incentive Plan may vest on a change of control of the
company, at the discretion of the Remuneration
Committee.
• The rules of the 2011, 2012 and 2013 Savings Related
Share Option Schemes provide that in the event of a
change of control, outstanding options may be
exchanged or replaced with similar options on the
same terms.
• There are no other significant agreements that take
effect, alter or terminate upon a change of control of
the company following a takeover bid.
• There are no known agreements between the company
and its directors or employees providing for
compensation for loss of office or employment that
occurs because of a takeover bid.
On behalf of the Board
Martin Walton
Company Secretary
24th March 2015
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Directors’ report - Other disclosures
Directors’ responsibilities statement
The directors are responsible for preparing the Annual
Report, the Directors Remuneration Report and the
financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the group and parent company
financial statements in accordance with International
Financial Reporting Standards as adopted by European
Union (IFRSs) and applicable law. Under company law
the directors must not approve the financial statements
unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company
and of the profit or loss of the group for that period. In
preparing these financial statements the directors are
required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgements and accounting estimates that are
reasonable and prudent;
• State whether applicable IFRSs as adopted by the
European Union have been followed subject to any
material departures disclosed or explained in the
financial statements;
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the company and the group and enable them to
ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act
2006 and, as regards the group financial statements,
Article 4 of the IAS Regulations. They are also
responsible for safeguarding the assets of the company
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Having taken advice from the Audit Committee, the
directors consider that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
company’s performance, business model and strategy.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Statement of directors pursuant to
the disclosure and transparency rules
Each of the directors, whose names and functions are
listed on pages 58 and 59, confirms that, to the best of
each person’s knowledge and belief:
• The financial statements, prepared in accordance with
IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position
and profit of the group and company, and
• The Strategic Report and other reports contained in the
annual report include a fair review of the development
and performance of the business and the position of
the company and group, together with a description of
the principal risks and uncertainties they face.
On behalf of the Board
Martin Walton
Finance Director
David Henderson
Chairman
24th March 2015
TClarke plc
Registered number:
119351
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Directors’ report
Independent auditors’ report to the members of TClarke plc
Report on the financial statements
Our opinion
In our opinion:
• TClarke plc’s group financial statements and parent
company financial statements (the “financial
statements”) give a true and fair view of the state of
the group’s and of the parent company’s affairs as at
31st December 2014 and of the group’s loss and the
group’s and the parent company’s cash flows for the
year then ended;
• the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Our audit approach
Overview
What we have audited
TClarke plc’s financial statements comprise:
• the group and parent company statements of financial
position as at 31st December 2014;
• the group income statement and statement of
comprehensive income for the year then ended;
• the group and parent company statements of cash
flows for the year then ended;
• the group and parent company statements of changes
in equity for the year then ended; and
• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in the notes
to the financial statements. These are cross-referenced
from the financial statements and are identified as
audited.
The financial reporting framework that has been applied
in the preparation of the financial statements is
applicable law and IFRSs as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
• Overall group materiality: £500,000 which represents 0.25% of revenue.
Materiality
• The majority of our audit work was conducted from the head office in London.
• We also visited ten local operating locations during the year end audit; this includes
6 offices in the South regional division, 3 in the North, and 1 in Scotland.
Audit scope
• Revenue recognition and long term contract accounting in respect of construction contracts.
Area of
focus
• Goodwill and intangibles impairment assessment, particularly in respect of TClarke South
East and Waldon Electrical Contractors.
• Going concern, particularly in respect of the forecast compliance with financial covenants.
• Classification of non-underlying items in respect of litigation, particularly the disclosure and
presentation in the financial statements of amounts arising in respect of exceptional claim
settlement costs.
• Defined benefit pension plan net assets and liabilities.
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The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (“ISAs (UK &
Ireland)”).
We designed our audit by determining materiality and
assessing the risks of material misstatement in the
financial statements. In particular, we looked at where
the Directors made subjective judgements, for example
in respect of significant accounting estimates that
involved making assumptions and considering future
events that are inherently uncertain. As in all of our
audits, we also addressed the risk of management
override of internal controls, including evaluating
whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest
effect on our audit, including the allocation of our
resources and effort, are identified as “areas of focus” in
the table below. We have also set out how we tailored
our audit to address these specific areas in order to
provide an opinion on the financial statements as a
whole, and any comments we make on the results of our
procedures should be read in this context. This is not a
complete list of all risks identified by our audit.
Area of focus
--
How the scope of our audit addresses the area of focus
Revenue recognition and long term contract
accounting in respect of construction contracts
Refer to Page 66 (Audit Committee Report) and Note 4 (Significant
judgements and sources of estimation uncertainty).
We focused on the revenue and profit recognised on long term
contracts because they result in material balances, involve
judgements and can be complex.
IFRSs require revenue to be recognised over the course of the
contract, using a ‘percentage completion’ method. If a project is or is
forecast to be loss making, they require the full loss to be recognised.
The group generates revenue from long term contracts relating
mainly to mechanical and electrical services. The group has a large
number of contracts; we focused on contracts which stood out
individually as being higher risk at the year end. Factors that would
have caused a contract to stand out included, for example, material
amounts under certified by the clients, disputes with clients or
subcontractors, or a high proportion of variations relative to the
contract total.
The percentage completion of contracts is calculated based on the
amount of costs incurred to date compared with the total expected
costs to be incurred on the project. Forecast end of life costs are
inherently subjective, although we note that TClarke plc does not
have any heightened level of subjectivity or judgement compared to
other companies in the industry.
We selected a sample of contracts to test, based on both quantitative and
qualitative criteria including revenue and/ or margin recognised in the year, loss
making contracts or contracts with significant balance sheet exposure and
revisited certain contracts we selected last year.
We obtained an understanding of management’s own process for reviewing long
term contracts (including the process for identifying loss-making and/or higher
risk contracts and assessing the supporting revenue recognition and cost
estimates, including contract variations) and gained an understanding of the key
judgements involved and background to the specific contracts selected in our
sample.
We tested the significant judgements adopted by the Directors in relation to the
revenue and margin recognition, and, in particular, judgements with respect to
the percentage completion, by:
• agreeing forecast costs to completion to documentary evidence – orders
signed with subcontractors or supporting calculations;
• tracing a sample of variations to supporting certifications or instructions from
clients,
• reconciling revenue recognised with amounts applied for and amounts
certified by clients and confirming, using our industry knowledge and
experience, that the reconciling items were appropriate; and
• comparing the costs incurred after the year end on a sample of projects to
the forecast costs, finding that post year end costs had been included in the
estimates; and tracing a sample to post year end certificates.
In auditing the identification of loss-making contracts and the extent of contract
losses, we tested the Directors’ estimates by comparing the budgeted total profit
on each selected contract with that budgeted at the prior year end and tested
significant variances to confirm they were supported by documentary evidence.
We considered the judgements made by the Directors concerning the
recoverability of contract variations reasonable in light of the evidence.
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Area of focus
--
Goodwill and intangibles impairment assessment
Refer to page 66 (Audit Committee Report), Note 4 (Significant
judgements and sources of estimation uncertainty) and Note 11
(Intangible assets).
We focused on this area because the Directors’ assessment of the
carrying value of goodwill and intangible assets involves complex and
subjective judgements about the future results of the business. No
impairment was recognised during the year.
We focused on those Cash Generating Units (CGUs) we considered
to carry more judgement because of current year losses or historic
underperformance against budgets, or for which management’s
impairment assessment model gave lower headroom relative to other
CGUs. The value in use calculations in relation to the group’s TClarke
South East (goodwill of £0.4m) and Waldon Electrical Contractors
(goodwill of £1.3m) were most sensitive to changes in key
assumptions. The key judgements involved were future revenue
growth, margin assumptions and discount rate applied as set out in
Note 11 to the group financial statements.
Going concern – compliance with loan covenants
Refer to page 66 (Audit Committee Report), Note 3 (Accounting
Policies) and Note 21 (Bank overdraft and loans).
We focused on the Directors’ conclusion that it is appropriate to
adopt the going concern basis in preparing the financial statements.
The group operates in the construction industry, which has been
significantly impacted by the economic downturn in recent years
resulting in lower margins and cashflow pressures. These difficult
market conditions have been reflected in the reducing margins
experienced by the group in recent years and by the loss before tax
of £0.7m recognised in the year ended 31st December 2014 (2013:
profit of £1.7m).
In addition, the group has a £5m committed three year Revolving
Credit Facility which includes financial covenants around interest
cover and net leverage ratios which are tested quarterly.
How the scope of our audit addresses the area of focus
We evaluated the Directors’ future cash flow forecasts, which were prepared
to a sufficiently detailed level, including comparing them to the latest Board
approved budgets, testing the integrity of the underlying calculations and
assessing how both internal and external drivers of performance were
incorporated into the projections. We also challenged the discount rate used by
independently recalculating the cost of capital, which was consistent with the
discount rate used.
For the group’s TClarke South East and Waldons Electrical Contractors
businesses, we also performed sensitivity analysis around the key drivers of the
cash flow forecasts, in particular the revenue growth and margin assumptions.
Having ascertained the extent of change in those assumptions that either
individually or collectively would be required for the goodwill and intangible
assets to be impaired, we considered the likelihood of such movement arising in
those key assumptions. We noted that the value in use of these two businesses
is more sensitive to changes in the assumptions concerning future revenue
growth and, in particular, gross margin than assumptions surrounding the
discount rate.
Because the TClarke South East and Waldon Electrical Contractors CGUs have
been loss making historically, the carrying value of the goodwill is dependent
on their ability to make profits from 2015 onwards. We tested the level of
secured work by tracing it to supporting orders. We tested the cost forecasts by
comparing a sample to tenders from subcontractors or calculations of man hours
required. 79% of the 2015 forecast revenue for TClarke South East and 78% of
the Waldon Electrical Contractor’s revenue have been secured.
The Directors have built increased profitability into their forecasts for these
CGUs and, we challenged them on the realistic impact of the actions they have
taken and intend to take to improve their profitability. Although we considered
the Directors' expectations of the impact of their actions to be reasonable in
light of the evidence available, failure to meet these forecasts and to generate
a profit will result in impairment of the goodwill and investment value associated
with the TClarke South East and Waldon Electrical Contractors CGUs.
We also evaluated the adequacy of disclosures made in Note 11 to the group
financial statements.
We obtained the Directors’ forecast of the group’s funding requirements and
covenant compliance for years 2015-2017 and details of the financing facilities in
place. The forecasts showed sufficient funding and compliance with covenants.
We read the relevant parts of the agreements relating to available financing and
re-performed the calculations of the covenants at each test point.
We performed sensitivity analyses around the covenant forecasts and the cash
flow forecasts including adjusting future revenue growth and margin
assumptions to industry average forecast levels. At its lowest level, EBITDA
would need to fall by over 50% before the most sensitive covenant is breached.
We further evaluated assumptions relating to changes in working capital,
including debtors/creditors days by comparing to the actual changes over the
previous year and finding them to be consistent with our expectation which was
based on previous experience by the Group adjusted for the impact of the final
account settlement on the contract in the Mission Critical division discussed in
2013. We assessed the Directors’ budgeting ability by comparing past budgets
to actual results achieved.
We discussed with the Directors the actions that they considered they could take
to alter the timing and/or amount of cash flows, considered whether they were
consistent with previous actions taken by the Directors and used our knowledge
of the business to consider the feasibility and likely impact of the Directors'
intentions. We then assessed the sensitivity of the Directors’ calculations to
changes in key inputs, in particular forecast underlying profit before tax.
Our opinion on Going Concern is outlined below.
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Independent auditors’ report
Area of focus
--
How the scope of our audit addresses the area of focus
Classification of non-recurring items in respect of litigation
Refer to page 66 (Audit Committee Report), Note 4 (Significant
judgements and sources of estimation uncertainty) and Note 7 (Profit
from operations).
The nature of the construction industry gives rise to disputes in the
ordinary course of business, which may result in claims. The Group
has insurance in place in respect of these claims.
During the year the Group has been subject to a number of claims in
respect of old projects. These claims are not considered, by the
Directors, to be in the ordinary course of business.
Given the judgement involved in assessing the classification of items
as non-recurring and the disclosure and presentation in the financial
statements we considered this to be an area of focus for our audit.
We discussed the non-recurring items in respect of litigation with the Directors
to gain an understanding of their rationale behind each individual non-recurring
item.
We read correspondence between the group and its lawyers and insurers, the
claimants and the claimants’ lawyers, in respect of the claims for a material
amount, to enable us to determine whether we concurred with the Directors’
view that the costs incurred were non-recurring, we didn’t identify any material
misstatements.
In addition, we obtained third party confirmations from the group’s lawyers that
we compared to the evidence we had received from management and which
confirmed that the list of claims we had been given was complete and that the
fact patterns we had been advised of were consistent with their understanding.
We also evaluated the adequacy of disclosure of settlements as non-recurring
items made in Note 7 to the group financial statements and confirmed that they
were consistent with the requirements of IFRSs.
Defined benefit pension plan net assets and liabilities
We tested the valuations of pension plan liabilities as follows:
Refer to page 66 (Audit Committee Report), Note 4 (Significant
judgements and sources of estimation uncertainty) and Note 23
(Pension commitments).
The Group operates a funded defined benefit pension scheme for
qualifying employees; this was closed to new members after 31st
December 2014.
The scheme has assets of £28.2m and post-retirement liabilities of
£44.5m, which are significant in the context of the overall balance
sheet of the Group.
The valuation of the pension liabilities requires significant levels of
judgement and technical expertise in choosing appropriate
assumptions. Unfavourable changes in a number of the key
assumptions (including salary increases, inflation, discount rates and
mortality) can have a material impact on the calculation of the
liability.
As a result of the size of the pension scheme deficit and the
judgements inherent in the actuarial assumptions involved in the
valuation the pension benefit obligations we considered this to be
an area of focus.
• We agreed the discount and inflation rates used in the valuation of the
pension liability to our internally developed benchmarks, finding it to be
within an acceptable range. Our benchmarks are based on our view of
various economic indicators.
• We discussed with the Directors the rationale for the discount rate that they
used and agreed that the rationale was appropriate.
• We tested the Directors’ assumptions around inflation and mortality rates by
comparing them to, and finding them consistent with, national and industry
averages, recognising the particular economic and health and safety factors
that affect the construction industry.
• There was no new census data in the year so we assessed the assumptions
made by the actuary in rolling forward the information from the most recent
census data.
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Independent auditors’ report
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account
the geographic structure of the group, the accounting
processes and controls, and the industry in which the
group operates.
The group is structured into three regional divisions; the
South, the North and Scotland, together with a property
segment comprised of one legal entity. The regional
divisions are further subdivided into legal entities for the
purposes of financial reporting. The majority of our audit
work was conducted from the head office in London and
we visited 10 of the local operating locations during the
year end audit. This includes 6 offices in the South
regional division, 3 in the North, and 1 in Scotland.
We scoped our audit based on the group’s legal entity
structure. Our work focused primarily on those entities
that in our view required an audit of their complete
financial information due to their size and risk
characteristics. This work included an audit of those
entities that comprise all, or substantially all of regional
divisions which together constituted 95 per cent of the
group revenue. In addition we carried out specific audit
procedures on the property segment, with additional
procedures performed at the group level (including over
impairment of goodwill, going concern and consolidation
process). This gave us the evidence we needed for our
opinion on the group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and
on the financial statements as a whole.
Based on our professional judgement, and consistent with last year, we determined materiality for the financial
statements as a whole as follows:
Overall group materiality
£500,000 (2013: £470,000).
How we determined it
0.25% of revenue.
Rationale for benchmark applied We used revenue as a basis for materiality to avoid the volatility that would result from
a profit based calculation.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£25,000 (2013: £23,500) as well as misstatements below that amount that, in our view, warranted reporting for
qualitative reasons.
Going concern
Under the Listing Rules we are required to review the
Directors’ statement, set out on page 63, in relation to
going concern. We have nothing to report having
performed our review.
As noted in the Directors’ statement, the Directors have
concluded that it is appropriate to prepare the financial
statements using the going concern basis of accounting.
The going concern basis presumes that the group and
parent company have adequate resources to remain in
operation, and that the Directors intend them to do so,
for at least one year from the date the financial
statements were signed. As part of our audit we have
concluded that the Directors’ use of the going concern
basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as to
the group’s and parent company’s ability to continue as a
going concern.
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Independent auditors’ report
Other required reporting
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
--
• Information in the Annual Report is:
– materially inconsistent with the information in the audited financial statements; or
– apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group and parent
company acquired in the course of performing our audit; or
– otherwise misleading.
• the statement given by the Directors on page 82, in accordance with provision C.1.1 of the UK Corporate
Governance Code (“the Code”), that they consider the Annual Report taken as a whole to be fair, balanced and
understandable and provides the information necessary for members to assess the group’s and parent company’s
performance, business model and strategy is materially inconsistent with our knowledge of the group and parent
company acquired in the course of performing our audit.
• the section of the Annual Report on page 66, as required by provision C.3.8 of the Code, describing the work of the
Audit Committee does not appropriately address matters communicated by us to the Audit Committee.
We have no exceptions
to report arising from
this responsibility.
We have no exceptions
to report arising from
this responsibility.
We have no exceptions
to report arising from
this responsibility.
Adequacy of accounting records and information
and explanations received
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• we have not received all the information and
explanations we require for our audit; or
• adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
• the parent company financial statements and the part
of the Directors’ Remuneration Report to be audited
are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this
responsibility.
Directors’ remuneration
Directors’ remuneration report
- Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of Directors’
remuneration specified by law are not made. We have
no exceptions to report arising from these
responsibilities.
Corporate governance statement
Under the Listing Rules we are required to review the
part of the Corporate Governance Statement relating to
the parent company’s compliance with ten provisions of
the UK Corporate Governance Code. We have nothing to
report having performed our review.
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Independent auditors’ report
Responsibilities for the financial
statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 82, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this
report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the
group’s and the parent company’s circumstances and
have been consistently applied and adequately
disclosed;
• the reasonableness of significant accounting estimates
made by the Directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing
the Directors’ judgements against available evidence,
forming our own judgements, and evaluating the
disclosures in the financial statements.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or
a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements and
to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Jonathan Hook (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 March 2015
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Financial statements for the year ended 31st December 2014
Consolidated income statement
for the year ended 31st December 2014
Continuing operations:
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses:
Amortisation of intangible assets
Non-recurring costs
Other administrative expenses
Total administrative expenses
Profit from operations
Finance income
Finance costs
(Loss) / profit before taxation
Taxation
(Loss) / profit for the year
(Loss) / earnings per share
Attributable to owners of TClarke plc:
Basic
Diluted
Notes
5
7
7
7
6
9
10
2014
£m
227.5
(203.8)
23.7
0.1
(0.2)
(1.2)
(22.4)
(23.8)
–
0.1
(0.8)
(0.7)
0.1
(0.6)
(1.58)p
(1.58)p
Consolidated statement of comprehensive income
for the year ended 31st December 2014
2014
£m
(Loss) / profit for the year
Other comprehensive (expense) / income:
Items that will not be reclassified to profit or loss
Actuarial (loss) / gain on defined benefit pension scheme
Other comprehensive (expense) / income for the year, net of tax
Total comprehensive (expense) / income for the year
(0.6)
(4.2)
(4.2)
(4.8)
2013
£m
217.1
(193.7)
23.4
0.1
(0.3)
(0.6)
(20.3)
(21.2)
2.3
–
(0.6)
1.7
(0.6)
1.1
2.51p
2.43p
2013
£m
1.1
0.7
0.7
1.8
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Financial statements for the year ended 31st December 2014
Consolidated statement of financial position
as at 31st December 2014
Notes
Non current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Amounts due from customers under construction contracts
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Amounts due to customers under construction contracts
Trade and other payables
Current tax liabilities
Obligations under finance leases
Net current assets
Non current liabilities
Bank loans
Other payables
Retirement benefit obligation
Total liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT share reserve
Revaluation reserve
Retained earnings
Total equity
The financial statements on pages
90 to 144 were approved by the
Board of Directors on 24th March 2015
and were signed on its behalf by
11
12
18
14
15
16
20
15
17
24
21
17
23
19
19
2014
£m
23.2
5.0
2.9
31.1
0.4
26.7
34.7
10.3
72.1
103.2
(2.9)
(59.6)
(0.1)
(0.1)
(62.7)
9.4
(5.0)
(0.3)
(16.3)
(21.6)
(84.3)
18.9
4.1
3.1
(0.1)
0.8
11.0
18.9
2013
£m
23.4
5.7
1.8
30.9
0.4
25.2
31.0
1.0
57.6
88.5
(2.3)
(50.4)
(0.1)
(0.1)
(52.9)
4.7
–
–
(10.9)
(10.9)
(63.8)
24.7
4.1
3.1
–
0.8
16.7
24.7
David Henderson Director
Mark Lawrence Director
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Financial statements for the year ended 31st December 2014
Company statement of financial position
as at 31st December 2014
Notes
12
13
18
15
16
20
15
17
21
23
19
19
2014
£m
0.3
32.4
3.3
36.0
13.4
12.7
0.6
6.2
32.9
68.9
(0.7)
(31.9)
(32.6)
0.3
(5.0)
(16.3)
(21.3)
(53.9)
15.0
4.1
3.1
(0.1)
7.9
15.0
2013
£m
0.3
32.4
2.2
34.9
10.8
8.7
0.2
0.5
20.2
55.1
(0.6)
(22.6)
(23.2)
(3.0)
–
(10.9)
(10.9)
(34.1)
21.0
4.1
3.1
–
13.8
21.0
Non current assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Amounts due from customers under construction contracts
Trade and other receivables
Current income tax receivables
Cash and cash equivalents
Total assets
Current liabilities
Amounts due to customers under construction contracts
Trade and other payables
Net current assets / (liabilities)
Non current liabilities
Bank loans
Retirement benefit obligation
Total liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT share reserve
Retained earnings
Total equity
The financial statements on
pages 90 to 144 were approved
by the Board of Directors on
24th March 2015
and were signed on its behalf by
Registered number: 119351
David Henderson
Director
Mark Lawrence
Director
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Financial statements for the year ended 31st December 2014
Consolidated statement of cash flows
for the year ended 31st December 2014
Net cash generated from / (used in) operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Receipts on disposal of property, plant and equipment
Net cash outflow on acquisitions of subsidiaries
Net cash generated from / (used in) investing activities
Financing activities
Proceeds from bank borrowing
Equity dividends paid
Acquisition of shares by ESOT
Repayments of obligations under finance leases
Net cash generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Company statement of cash flows
for the year ended 31st December 2014
Net cash (used in) / generated from operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Dividends received from subsidiaries
Net cash outflow on investments in subsidiaries
Net cash generated from investing activities
Financing activities
Proceeds from bank borrowing
Acquisition of shares by ESOT
Equity dividends paid
Net cash generated from / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
20
21
19
19
20
20
Notes
20
21
19
19
20
20
93
Annual Report & financial statements 2014
2014
£m
5.0
0.1
(0.5)
0.9
–
0.5
5.0
(1.1)
(0.1)
–
3.8
9.3
1.0
10.3
2014
£m
(0.5)
0.1
(0.1)
2.4
–
2.4
5.0
(0.1)
(1.1)
3.8
5.7
0.5
6.2
2013
£m
(2.6)
–
(0.4)
0.1
(0.4)
(0.7)
–
(1.2)
–
(0.1)
(1.3)
(4.6)
5.6
1.0
2013
£m
(3.5)
–
(0.1)
2.4
(0.4)
1.9
–
–
(1.2)
(1.2)
(2.8)
3.3
0.5
TCK-REPORT-pages 61-144 REPRO-X_Layout 1 27/03/2015 20:48 Page 94
Financial statements for the year ended 31st December 2014
Consolidated statement of changes in equity
for the year ended 31st December 2014
Attributable to owners of the parent
At 1st January 2013
Comprehensive income:
Profit for the year
Other comprehensive income:
Actuarial gain on retirement benefit obligation
Deferred income tax on actuarial gain
on retirement benefit obligation
Effect of change in tax rate
Total other comprehensive income
Total comprehensive income
Transactions with owners
Dividends paid
Total transactions with owners
At 31st December 2013
Comprehensive income:
Loss for the year
Other comprehensive income
Actuarial loss on retirement benefit obligation
Deferred income tax credit on actuarial loss
on retirement benefit obligation
Effect of change in tax rate
Total other comprehensive expense
Total comprehensive expense
Transactions with owners
Share based payment credit
Shares acquired by ESOT
Dividends paid
Total transactions with owners
At 31st December 2014
Share
capital
£m
4.1
Share
premium
£m
3.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.1
3.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.1
3.1
ESOT
share
reserve
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
–
(0.1)
(0.1)
Revaluation
reserve
£m
Retained
earnings
£m
0.8
16.1
Total
£m
24.1
1.1
1.2
(0.3)
(0.2)
0.7
1.8
(1.2)
(1.2)
24.7
1.1
1.2
(0.3)
(0.2)
0.7
1.8
(1.2)
(1.2)
16.7
(0.6)
(0.6)
(5.3)
(5.3)
1.2
(0.1)
(4.2)
(4.8)
0.2
–
(1.1)
(0.9)
11.0
1.2
(0.1)
(4.2)
(4.8)
0.2
(0.1)
(1.1)
(1.0)
18.9
–
–
–
–
–
–
–
–
0.8
–
–
–
–
–
–
–
–
–
–
0.8
94
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Notes to the financial statements for the year ended 31st December 2014
Company statement of changes in equity
for the year ended 31st December 2014
Attributable to owners of the parent
At 1st January 2013
Comprehensive income:
Profit for the year
Other comprehensive income
Actuarial gain on retirement benefit obligation
Deferred income tax on actuarial gain
on retirement benefit obligation
Effect of charge in tax rate
Total other comprehensive income
Total comprehensive income
Transactions with owners
Dividends paid
Total transactions with owners
At 31st December 2013
Comprehensive income:
Loss for the year
Other comprehensive expense
Actuarial loss on retirement benefit obligation
Deferred income tax credit on actuarial loss
on retirement benefit obligation
Effect of change in tax rate
Total other comprehensive expense
Total comprehensive expense
Transactions with owners
Share based payment credit
Share acquired by ESOT
Dividends paid
Total transactions with owners
At 31st December 2014
Share
capital
£m
4.1
Share
premium
£m
3.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.1
3.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.1
3.1
ESOT
share
reserve
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
–
(0.1)
(0.1)
Retained
earnings
£m
12.3
2.0
1.2
(0.3)
(0.2)
0.7
2.7
(1.2)
(1.2)
13.8
Total
£m
19.5
2.0
1.2
(0.3)
(0.2)
0.7
2.7
(1.2)
(1.2)
21.0
(0.8)
(0.8)
(5.3)
(5.3)
1.2
(0.1)
(4.2)
(5.0)
0.2
–
(1.1)
(0.9)
7.9
1.2
(0.1)
(4.2)
(5.0)
0.2
(0.1)
(1.1)
(1.0)
15.0
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Notes to the financial statements
for the year ended 31st December 2014
Note 1 – General information
TClarke plc is a public limited company listed on The London Stock Exchange, incorporated and domiciled in the
United Kingdom. The address of its registered office and principal place of business is disclosed in the Directors’
report on page 59. The nature of the group’s operations and its principal activities are described in Note 5 and in
the Strategic report on pages 2 to 57.
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Notes to the financial statements for the year ended 31st December 2014
Note 2 – Application of new and revised IFRSs
A. New standards, interpretations and amended
standards adopted by the group
The following standards, interpretations and amended
standards have been applied for the first time for the
financial year beginning 1st January 2014.
IFRS 10 ‘Consolidated financial statements’
IFRS 10 ‘Consolidated financial statements’ built on
existing guidance concerning the concept of ‘control’
and clarified that ‘control’ was the deciding factor in
determining whether an entity should be included in the
consolidated financial statements or not. The application
of this standard has not had a significant impact on the
group’s consolidated financial statements.
IAS 36 – Recoverable Amount Disclosures –
Amendments to IAS 36
The group has applied the amendments to IAS36 –
‘Recoverable Amount Disclosures for Non-Financial
Assets’ for the first time in the current financial year.
The amendments to IAS 36 remove the requirement to
disclose the recoverable amount of a cash-generating
unit (‘CGU’) to which goodwill or other indefinite life
intangible assets had been allocated where there has
been no impairment or reversal of impairment of the
related CGU. Furthermore, the amendments introduce
additional disclosure requirements applicable to when the
recoverable amount of an asset or CGU is measured at
fair value less costs of disposal. These new disclosures
include the fair value hierarchy, key assumptions and
valuation techniques used which are in line with the
disclosure required by IFRS 13 ‘Fair Value
Measurements’.
The application of these amendments has had no
material impact on the disclosures in the group’s
consolidated financial statements.
Amendments to IAS 32 ‘Offsetting Financial
Assets and Liabilities’
The group has applied the amendments to IAS 32’
Offsetting Financial Assets and Liabilities’ for the first
time in the current financial year. The amendments to
IAS 32 clarify the requirements relating to the offsetting
of financial assets and financial liabilities. Specifically
the amendments clarify the meaning of ‘currently has
a legally enforceable right of set-off’ and ‘simultaneous
realisation and settlement’.
The amendments have been applied retrospectively.
The group has assessed whether certain of its financial
assets and financial liabilities qualify for offset based
on the criteria set out in the amendments and have
concluded that the application of the amendments has
had no impact on the amounts recognised in the group’s
consolidated financial statements.
B. New standards, interpretations and amended
standards in issue but not yet adopted by the
group
IFRS9 ‘Financial Instruments’
IFRS 9 introduced new requirements for the classification
and measurement of financial instruments, including
impairment requirements for financial assets. The key
requirements of IFRS 9 are:
• All financial assets are required to be classified and
measured, on initial recognition and subsequently, at
either fair value or amortised cost. The classification
depends on the entity’s business model for managing
its financial instruments and the contractual cash
flow characteristics of the instrument.
•
•
In relation to the impairment of financial assets,
IFRS 9 requires an expected credit loss model,
as opposed to an incurred credit loss model under
IAS 39. The expected credit loss model requires an
entity to account for expected credit losses at each
reporting date to reflect changes in credit risk since
initial recognition.
For financial liabilities, IFRS 9 retains most of IAS39’s
requirements. The main change is that where the fair
value option is taken for financial liabilities, the part
of a fair value change due to an entity’s own credit
risk is recorded in other comprehensive income
rather than the income statement, unless this creates
an accounting mismatch.
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Notes to the financial statements for the year ended 31st December 2014
Note 2 – Application of new and revised IFRSs continued
The group is yet to assess the full impact of IFRS9
and intends to adopt the standard no later than the
accounting period beginning 1st January 2018.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2015 and will become
mandatory with effect from accounting periods beginning
on or after 1st January 2017, with early adoption
permitted. IFRS 15 establishes a single comprehensive
model for entities to use in accounting for revenue
arising from contracts with customers. IFRS 15 will
supercede the current revenue recognition guidance
including IAS 18 ‘Revenue’, IAS11 ‘Construction
contracts’ and the related interpretations when it
becomes effective. The core principle of IFRS15 is that
an entity should recognise revenue to depict the transfer
of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services.
Under IFRS 15 an entity recognises revenue when, or
as, a performance obligation is satisfied, that is when
‘control’ of the goods or services underlying the particular
performance obligation is transferred to the customer.
The group is still assessing the impact of IFRS 15, which
as a minimum is likely to have significant disclosure
implications, and intends to adopt the new standard
no later than the accounting period beginning
1st January 2017.
Amendments to IAS16 and IAS38 ‘Clarification
of Acceptable Methods of Depreciation and
Amortisation’
The amendments to IAS 16 prohibit entities from using
a revenue based depreciation method for items of
property, plant and equipment. The amendments to IAS
38 introduce a rebuttable presumption that revenue is
not an appropriate basis for amortisation of an intangible
asset. The amendments apply prospectively for
accounting periods beginning on or after 1st January
2016. Currently the group uses the straight line method
of depreciation or amortisation for its property, plant
and equipment and intangible assets, respectively. The
directors believe that the straight-line method is the most
appropriate method to reflect the consumption of
economic benefits inherent in the respective assets
and, accordingly, the directors do not anticipate the
application of these amendments will have a significant
impact on the group’s consolidated financial statements.
Amendments to IAS 19 ‘Defined Benefit Plans:
Employee Contributions’
The amendments to IAS 19 clarify how an entity should
account for contributions made by employees or third
parties to defined benefit plans, based on whether those
contributions are dependent on the number of years
of service provided by the employee. For contributions
that are independent of the number of years of service,
the entity may either recognise the contributions as a
reduction in the service cost in the period in which the
related service is rendered, or to attribute them to the
employee’s periods of service using the projected
unit credit method; whereas for contributions that are
dependent on the number of years of service, the entity
is required to attribute them to the employee’s periods
of service. The directors do not anticipate the application
of these amendments will have a significant impact on
the group’s consolidated financial statements.
Annual improvements IFRSs
The annual improvements programme undertaken by
the International Accounting Standards Board covers
a number of amendments to various IFRS’s, including
amendments to various definitions in IFRS 2 ‘Share
based payments’, amendments to IFRS 3 ‘Business
combinations’ regarding the measurement of contingent
consideration, and amendments to IFRS 8 ‘Operating
segments’ regarding the aggregation criteria for
operating segments, none of which are expected to
have a significant impact on the group’s consolidated
financial statements.
There are no others IFRSs or IFRS IC
interpretations that are not yet effective that
would be expected to have a material impact on
the group’s consolidated financial statements.
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies
The principal accounting policies applied in the
preparation of these consolidated and parent company
financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
A. Basis of preparation
These financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union
(EU), IFRS IC Interpretations and the Companies Act
2006 applicable to companies reporting under IFRS and
have been prepared on a going concern basis under the
historic cost convention as modified by the revaluation of
land and buildings. They comprise the parent company
financial statements of TClarke plc and the consolidated
financial statements of TClarke plc and all its subsidiaries
made up to 31st December 2014 and have been
presented in £m.
The preparation of financial statements in conformity
with IFRS as adopted by the EU, requires the use of
certain critical accounting estimates. It also requires
management to exercise its judgement in the process
of applying the group’s accounting policies. The areas
involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant
to the consolidated financial statements are disclosed in
Note 4.
Going concern
The group had positive net cash balances at the year
end and has in place a three year £5 million committed
Revolving Credit Facility, which was fully drawn down,
and an £8 million overdraft facility. For details of the
covenants in place refer to Note 21 on page 132 The
group draws on the overdraft facility as and when
required to meet working capital requirements. As with all
such facilities the overdraft is subject to annual review
and is repayable on demand. The overdraft facility was
last reviewed in February 2014. The directors have
received confirmation from the bank that they know of no
reason why the overdraft facility will not be renewed
when it next falls due for review. There is no other
external debt apart from finance lease and hire purchase
contracts.
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.
B. Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the company and entities
controlled by the company (its subsidiaries) made up
to 31st December each year. Control is achieved when
the company has power over the investee, is exposed, or
has rights, to variable returns from its involvement with
the investee, and has the ability to use its power to affect
its returns.
Income and expenses of subsidiaries acquired or
disposed of during the year are included in the
consolidated income statement from the effective date
of acquisition or up to the effective date of disposal, as
appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their
accounting policies into line with those used by other
members of the group.
All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
C. Employee Share Ownership Trust (ESOT)
As the company is deemed to have control of its ESOT
trust, it is included in the consolidated financial
statements. The ESOT's assets (other than investments in
the company's shares), liabilities, income and expenses
are included on a line-by-line basis in the consolidated
financial statements. The ESOT's investment in the
company's shares is deducted from equity in the
consolidated statement of financial position as if they
were treasury shares.
D. Segmental reporting
Operating divisions are reported in a manner consistent
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
with internal reporting provided to the Group Chief
Executive, who is the chief operating decision maker
responsible for allocating resources to and assessing
the performance of operating divisions.
E. Revenue recognition
Sales revenue is measured at the fair value of work
performed and goods and services provided in the normal
course of business, net of discounts and VAT. Revenue
from construction contracts is recognised in accordance
with the group’s policy on construction contracts (see
Note 3F). Revenue from the rendering of services that do
not fall to be accounted for as construction contracts is
accounted for by reference to the stage of completion of
the relevant contract, determined by reference to the
proportion of costs incurred. Revenue from the sale of
materials and finished goods is recognised when the
group has transferred the significant risks and rewards of
ownership to the buyer and it is probable that the group
will receive payment. These criteria are considered to be
met when the materials or goods have been delivered to
and accepted by the buyer.
Rental income from operating leases is recognised on
a straight-line basis over the term of the relevant lease.
Interest revenue is accrued on a time basis, by reference
to the principal outstanding and at the effective interest
rate applicable.
Dividend revenue from investments is recognised
when the company’s right to receive payment has been
established.
F. Construction contracts
Where the outcome of a construction contract can be
estimated reliably, revenue and costs are recognised
by reference to the stage of completion of the contract
activity at the reporting date, measured based on the
proportion of contract costs (prime costs and overheads)
incurred for the work performed to date relative to the
estimated total contract costs, except where this would
not be representative of the stage of completion.
The earliest point at which profit is taken is that at which
the outcome of the contract, based on an assessment
by officials of the company, can be reliably foreseen,
taking into account the circumstances of each contract.
Variations are included to the extent that the amount can
be measured reliably and receipt is considered probable,
but no account is taken of claims receivable until agreed.
Full provision is made for any foreseeable losses to
completion. Where the outcome of a construction
contract cannot be estimated reliably, contract revenue
is recognised to the extent of contract costs incurred that
it is probable will be recoverable.
G. Acquisitions and goodwill
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The consideration
transferred in a business combination is measured at fair
value, which is calculated as the aggregate of the fair
values at the acquisition date of assets transferred,
liabilities incurred and equity instruments issued, to the
former owners by the group in exchange for control of
the acquiree. Acquisition related expenses are recognised
directly in the income statement.
Purchased goodwill is measured as the excess of the sum
of the fair value of the consideration transferred over the
net of the acquisition date fair values of the identifiable
assets and liabilities acquired, and is capitalised and
classified as an intangible asset in the consolidated
statement of financial position.
The acquiree’s identifiable assets, liabilities and
contingent liabilities are recognised at their fair values
at the acquisition date, except for non-current assets
(or disposal groups) that are classified as held for sale
in accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations.
When the consideration transferred by the group in a
business combination includes a contingent consideration
arrangement, the contingent consideration is measured at
its acquisition-date fair value and included as part of the
consideration transferred in a business combination.
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
Changes in the fair value of the contingent consideration
that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments
against goodwill.
Measurement period adjustments are adjustments that
arise from additional information obtained during the
‘measurement period’ (which cannot exceed one year
from the acquisition date) about facts and circumstances
that existed at the acquisition date. The subsequent
accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement
period adjustments depends on how the contingent
consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent
reporting dates and its subsequent settlement is
accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured
at subsequent reporting dates in accordance with IAS 39,
or IAS 37 Provisions, Contingent Liabilities and Contingent
Assets, as appropriate, with the corresponding gain or
loss being recognised in profit or loss.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the group reports provisional
amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted
during the measurement period, or additional assets
or liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed at
the acquisition date that, if known, would have affected
the amounts recognised at that date.
Goodwill arising on acquisitions before the date of
transition to IFRS has been retained at the previous UK
GAAP amount subject to being tested for impairment.
Goodwill is reviewed for impairment on an annual basis.
When the directors consider the initial value of the
acquisition to be negligible the goodwill is written off
to the income statement immediately.
H. Impairment of goodwill and other
non-financial assets
Goodwill arising on an acquisition of a business is carried
at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Impairment tests on goodwill are undertaken annually
at the financial year end. Other non-financial assets are
subject to impairment tests whenever events or changes
in circumstances indicate that their carrying amount may
not be recoverable. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value
in use and fair value less costs to sell), the asset is
written down accordingly.
Where it is not possible to estimate the recoverable
amount of an individual asset, the impairment test is
carried out on the asset’s cash-generating unit (i.e. the
lowest group of assets in which the asset belongs for
which there are separately identifiable cash flows).
For the purposes of impairment testing, goodwill is
allocated on initial recognition to each of the group’s
cash-generating units that are expected to benefit from
the synergies of the combination giving rise to the
goodwill.
Impairment charges are included in non-recurring costs
in the consolidated income statement, except to the
extent they reverse gains previously recognised in the
consolidated statement of comprehensive income. An
impairment loss recognised for goodwill is not reversed.
I. Intangible assets
Intangible assets acquired in a business combination
and recognised separately from goodwill are initially
recognised at cost, being their fair value at the
acquisition date.
Subsequent to initial recognition intangible assets are
reported at cost less accumulated amortisation and
impairment losses. Amortisation is recognised on a
straight line basis over the estimated useful lives of the
relevant assets, determined on an individual basis and
ranging from 1 to 10 years.
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
J. Property, plant and equipment
Land and buildings comprise mainly offices occupied
by the operating units of the group. Land and buildings
are shown at fair value, based on valuations carried
out by external independent valuers, less subsequent
depreciation. Valuations are performed with sufficient
regularity to ensure that the fair value of a revalued asset
does not differ materially from its carrying amount. Any
accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the
asset, and the net amount is restated to the revalued
amount of the asset. On disposal of the asset the balance
of the revaluation reserve pertaining to the asset is
transferred from the revaluation reserve to retained
earnings.
All other property, plant and equipment is stated at
historical cost less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as
appropriate, only when it is probable that future
economic benefits associated with the item will flow to
the group and the cost of the item can be measured
reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are
charged to the income statement during the financial
period in which they are incurred.
Increases in the carrying amount arising on revaluation
of land and buildings are credited to other comprehensive
income and shown as revaluation reserves in
shareholders’ equity. Decreases that offset previous
increases of the same asset are charged in other
comprehensive income and debited against revaluation
reserves directly in equity; all other decreases are
charged to the income statement. Each year the
difference between depreciation based on the revalued
carrying amount of the asset charged to the income
statement, and depreciation based on the asset’s original
cost is transferred from the revaluation reserve to
retained earnings. On disposal of the asset the balance
of the revaluation reserve pertaining to the asset is
transferred from the revaluation reserve to retained
earnings.
Depreciation is calculated on a straight line basis so as
to write off the cost less residual values of the relevant
assets over their useful lives, using the following rates:
Freehold properties 2%
Plant and machinery 10%-25%
Improvements to property:
Freehold 10%
Leasehold 10% or life of lease if shorter
Motor vehicles 25%-33%
Assets held under finance leases are depreciated over
their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease.
K. Investments
Investments in subsidiaries are recorded at cost,
being the fair value of consideration paid. Cost includes
the fair value of equity-settled share based payment
arrangements relating to options to acquire shares in
TClarke plc granted to subsidiary employees under
savings related share option schemes.
L. Inventories
Inventories of raw materials and consumables are initially
recognised at cost, and subsequently at the lower of cost
and net realisable value. Cost is determined on a first-in
first-out basis and comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the
asset to its present location and condition.
M. Leasing and hire purchase commitments
Leases (including similar hire purchase arrangements)
are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified
as operating leases.
Assets held under finance leases are initially recognised
as assets of the group at their fair value at the inception
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
of the lease or, if lower, at the present value of the
minimum lease payments. The corresponding liability
to the lessor is included in the statement of financial
position as a finance lease obligation. Lease payments
are apportioned between finance charges and reduction
of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance
charges are charged directly to the income statement
except where they relate to qualifying assets in which
case they are capitalised in accordance with the group’s
borrowing costs policy (see Note 3P).
Operating lease payments are recognised as an expense
on a straight-line basis over the lease term. In the event
that lease incentives are received to enter into operating
leases, such incentives are recognised as a liability.
The aggregate benefit of incentives is recognised as a
reduction of rental expense on a straight-line basis over
the lease term.
N. Financial instruments
The group’s financial instruments comprise trade and
other receivables (excluding prepayments), trade and
other payables (excluding deferred income), finance
leases and similar hire purchase contracts, bank deposits,
bank loans and cash and cash equivalents net of
overdrafts. The group does not trade in any financial
derivatives. Financial assets and liabilities are offset at the
net amount reported in the balance sheet when there is a
legally enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis or
realise the asset and settle the liability simultaneously.
Trade and other receivables
Trade and other receivables, which are non-interest
bearing, are measured on initial recognition at fair
value and subsequently at amortised cost. Appropriate
allowances for estimated irrecoverable amounts are
recognised in the income statement when there is
objective evidence that the asset is impaired, measured
as the difference between the asset’s carrying value and
the fair value of the estimated recoverable amount, if
any. Insolvency or significant financial difficulties of the
debtor, late payments and disputes are considered
indicators that a receivable is impaired. The carrying
amount of a trade receivable is reduced to its estimated
recoverable amount through the use of an allowance
account and the expense recognised in the income
statement in administrative expenses. When a trade
receivable is uncollectible it is written off against the
allowance account for trade receivables.
Bank deposits
Bank deposits comprise cash placed on deposit with
financial institutions with an initial maturity of six months
or more, and are measured at amortised cost. Finance
income is recognised using the effective interest method
and is added to the carrying value of the asset as it
arises.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and
in hand, bank overdrafts, demand deposits and other
short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject
to an insignificant risk of changes in value. Bank
overdrafts are included within current liabilities in the
statement of financial position. Finance income and
expense are recognised using the effective interest
method and are added to the carrying value of the asset
or liability as they arise.
Bank loans
Interest bearing bank loans are recorded at the fair
value of the proceeds received, net of direct issue costs.
Finance charges are accounted for on an accruals basis in
the income statement using the effective interest method,
and are added to the carrying value of the instrument to
the effect that they are not settled in the period in which
they arise.
Trade and other payables
Trade and other payables are initially measured at fair
value and subsequently at amortised cost. Trade and
other payables are non-interest bearing.
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
O. Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
Tax is recognised in the income statement except to
the extent that it relates to items recognised in other
comprehensive income. The tax currently payable is
based on taxable profit for the period. Taxable profit
differs from net profit as reported in the income
statement because it excludes items of income or
expense that are taxable or deductible in other years
and it further excludes items that are never taxable or
deductible.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts
of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of
taxable profit and is accounted for using the liability
method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable
that taxable profits will be available against which
deductible temporary differences can be utilised.
The amount of any deferred tax asset or liability
recognised is determined using tax rates that have
been enacted or substantively enacted by the reporting
date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered.
Deferred tax assets and liabilities are offset as the
group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets
and liabilities relate to taxes levied on either the same
company, or on different companies where there is an
intention to settle current tax assets and liabilities on
a net basis.
P. Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
carried at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the
period of the borrowings using the effective interest
method.
Q. Borrowing costs
Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be
drawn down. In this case the fee is deferred until the
loan is drawn down. To the extent there is no evidence
that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for
liquidity services and amortised over the period of the
facility to which it relates.
Borrowing costs that are directly attributable to qualifying
assets are added to the cost of the asset. All other
borrowing costs are recognised in the income statement
in the period in which they are incurred.
R. Dividends
Dividends are recognised when they become legally
payable. In the case of interim dividends to equity
shareholders, this is when they are paid. In the case
of final dividends, this is when approved by the
shareholders at the AGM.
S. Retirement benefit costs
Payments to defined contribution retirement benefit
schemes are charged as an expense as they fall due.
For defined benefit retirement benefit schemes, the cost
of providing benefits is determined using the Projected
Unit Credit Method, with actuarial valuations being carried
out at each reporting date. Actuarial gains and losses
are recognised in full in the period in which they occur.
They are recognised outside the income statement and
presented as a component of other comprehensive
income.
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Notes to the financial statements for the year ended 31st December 2014
Note 3 – Accounting policies continued
Past service cost is recognised immediately in the
income statement.
The retirement benefit obligation represents the fair
value of the defined benefit obligation at each reporting
date as reduced by the fair value of scheme assets.
T. Long-term employee benefits
Long-term employee benefits are accrued when the
group has a legal or constructive obligation to make
payments under long-term employee benefit
arrangements and the amount of the obligation can be
reliably measured. The liability is discounted to present
value where it is due after more than one year.
U. Share-based payments
Equity-settled share-based payments to employees and
others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details
regarding the determination of the fair value of equity-
settled share-based transactions are set out in Note 19.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a
straight-line basis over the period, based on the group’s
estimate of equity instruments that will eventually vest,
with a corresponding increase in equity. At the end of
each reporting period, the group revises its estimate of
the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any,
is recognised in profit or loss such that the cumulative
expense reflects the revised estimate, with a
corresponding adjustment to equity.
V. Non-recurring items
Non-recurring items are disclosed separately in the
financial statements where it is necessary to do so
to provide further understanding of the financial
performance of the group. They are material items of
income or expense that have been shown separately due
to the significance of their nature or amount.
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Notes to the financial statements for the year ended 31st December 2014
Note 4 - Significant judgements and sources of estimation uncertainty
In the application of the group’s accounting policies,
which are described above, the directors are required
to make judgements, estimates and assumptions about
the carrying amounts of assets and liabilities at the
reporting date and the amounts of revenue and
expenses incurred during the period that may not be
readily apparent from other sources. The estimates
and associated assumptions are based on historical
experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised if the revision affects only that
period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The estimates and assumptions that have the most
significant impact are set out below.
Revenue and margin
The recognition of revenue and profit on construction
contracts is a key source of estimation uncertainty
due to the difficulty of forecasting the final costs to
be incurred on a contract in progress and the process
whereby applications are made during the course of
the contract with variations, which can be significant,
often being agreed as part of the final account
negotiation. The group’s policies for the recognition of
revenue and profit on construction contracts are set out
on page 100. The directors also take into account the
recoverability of contract balances and trade receivables
and allowances are made for those balances which are
considered to be impaired.
Non-underlying items
Non-underlying items are items of financial
performance which the group believes should be
separately identified on the face of the income
statement to assist in understanding the underlying
financial performance achieved by the group. The
quantification, disclosure and presentation in the
financial statements of non-underlying items requires
judgement.
Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash generating
unit giving rise to the goodwill, including the estimation
of the timing and amount of future cash flows
generated by the cash generating unit and a suitable
discount rate. Further details are provided in Note 11.
Retirement benefit obligations
The costs, assets and liabilities of the defined benefit
scheme operated by the group are determined
using methods relying on actuarial estimates and
assumptions, which are largely dependent on factors
outside the control of the group. Details of the key
assumptions are set out in Note 23, and include the
discount rate, expected return on assets, rate of
inflation and mortality rates. The group takes advice
from independent actuaries relating to the
appropriateness of the assumptions. Changes in the
assumptions used may have a significant effect on the
income statement, statement of comprehensive income
and the statement of financial position. A sensitivity
analysis is included in Note 23 on page 133.
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Notes to the financial statements for the year ended 31st December 2014
Note 5 - Segment information
A. Reportable segments
The group provides electrical and mechanical
contracting and related services to the construction
industry and end users.
For management and internal reporting purposes
the group is organised geographically into three regional
divisions; 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 amortisation of intangible assets and non-
recurring costs. Non-recurring items for each segment
are disclosed on pages 108 and 109 and in Note 7.
All assets and liabilities of the group have been
allocated to segments apart from the retirement benefit
obligation, and tax assets and liabilities.
All transactions between segments are undertaken on
normal commercial terms. All the group’s operations
are carried out within the United Kingdom, and there
is no significant difference between revenue based on
the location of assets and revenue based on location of
customers. The accounting policies for the reportable
segments are the same as the group’s accounting
policies disclosed in Note 3.
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Notes to the financial statements for the year ended 31st December 2014
Revenue from external operations
167.6
43.4
16.5
Note 5 - Segment information continued
B. Segment information - current year
31st December 2014
Total revenue
Inter segment revenue
South
£m
167.8
(0.2)
North
£m
43.4
–
Underlying (loss) / profit from operations
Amortisation of intangibles
Non-recurring costs:
Exceptional claim settlement cost
(Loss) / profit from operations
Finance income
Finance costs
(Loss) / profit before tax
Taxation expense
Loss for the year from continuing operations
Other segment information:
Depreciation
Bad debt expense
Additions to non-current assets:
Property, plant and equipment
(1.1)
–
(1.1)
(2.2)
0.1
(0.9)
(3.0)
0.4
0.3
0.3
1.6
(0.2)
–
1.4
0.1
–
1.5
0.1
0.2
0.1
Scotland
£m
Property
£m
Unallocated
&
elimination
£m
18.3
(1.8)
0.6
–
(0.1)
0.5
–
–
–
–
–
0.3
–
–
0.3
–
–
0.5
0.3
–
–
–
–
–
–
–
(0.1)
0.1
–
Total
£m
229.5
(2.0)
227.5
1.4
(0.2)
(1.2)
–
0.1
(0.8)
(0.7)
0.1
(0.6)
–
–
–
0.1
–
0.1
–
–
–
0.6
0.5
0.5
Assets
Liabilities
Net assets / (liabilities)
70.4
22.7
(57.8)
(11.2)
12.6
11.5
7.9
(4.1)
3.8
4.1
(0.9)
3.2
(1.9)
103.2
(10.3)
(84.3)
(12.2)
18.9
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Notes to the financial statements for the year ended 31st December 2014
Note 5 - Segment information continued
C. Segment information - prior year
31st December 2013
Total revenue
Inter segment revenue
Revenue from external operations
Underlying profit from operations
Amortisation of intangibles
Non-recurring costs:
Exceptional claim settlement cost
Profit from operations
Finance income
Finance costs
(Loss) / profit before tax
Taxation expense
Profit for the year from continuing operations
Other segment information:
Depreciation
Bad debt expense
Additions to non-current assets:
Property, plant and equipment
Assets
Liabilities
Net assets / (liabilities)
South
£m
172.6
(0.4)
172.2
1.0
–
(0.5)
0.5
–
(0.7)
(0.2)
0.3
0.1
0.2
60.2
(43.1)
17.1
North
£m
37.9
(6.5)
31.4
1.8
(0.3)
–
1.5
0.1
–
1.6
0.2
0.1
0.2
19.0
(8.9)
10.1
Scotland
£m
Property
£m
Unallocated
&
elimination
£m
13.6
(0.1)
13.5
0.2
–
(0.1)
0.1
–
–
0.1
–
–
–
8.2
(4.4)
3.8
–
–
–
0.2
–
–
0.2
–
–
0.2
0.1
–
–
4.2
(1.3)
2.9
Total
£m
224.1
(7.0)
217.1
3.2
(0.3)
(0.6)
2.3
–
(0.6)
1.7
(0.6)
1.1
0.6
0.2
0.4
–
–
–
–
–
–
–
(0.1)
0.1
–
–
–
–
(3.1)
(6.1)
(9.2)
88.5
(63.8)
24.7
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Notes to the financial statements for the year ended 31st December 2014
Note 5 - Segment information continued
D. Revenue
Total revenue comprises:
Sales revenue
Construction contracts
Other services
Operating income:
Rent
2014
£m
2013
£m
203.7
23.8
227.5
190.1
27.0
217.1
0.1
0.1
E. Information about major customers
Revenue for the year ended 31st December 2013 included £40m which arose from sales to a single customer.
No other single customer contributed 10% or more of the group’s revenue for either 2014 or 2013.
Note 6 – Finance income and finance cost
Finance income
Interest on bank deposits
Finance cost
Interest on bank overdrafts and loans
Interest cost in respect of defined benefit pension scheme
Net total of finance income and finance cost
2014
£m
0.1
(0.3)
(0.5)
(0.8)
(0.7)
2013
£m
–
(0.1)
(0.5)
(0.6)
(0.6)
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Notes to the financial statements for the year ended 31st December 2014
Note 7 – Profit from operations
A. Operating profit is stated after charging / (crediting):
Amortisation of intangible assets
Non-recurring costs (see Note B below)
Depreciation of property, plant and equipment
Profit on disposal of property, plant and equipment
Operating lease charges
– land and buildings
– plant, machinery and vehicles
Raw materials and consumables
Rent receivable
Bad debt expense
Auditors’ remuneration – statutory audit fee
– Company and consolidation
– Subsidiary companies
Auditors’ remuneration – non-audit fees
Employee benefit expense (see Note 8)
B. Non-recurring costs comprise:
Exceptional claim settlement costs
2014
£m
0.2
1.2
0.6
(0.2)
0.4
0.5
62.1
(0.1)
0.5
0.1
0.1
–
56.3
2014
£m
1.2
2013
£m
0.3
0.6
0.6
(0.1)
0.4
0.3
58.0
(0.1)
0.2
0.1
0.1
–
51.9
2013
£m
0.6
A subsidiary company was one of a number of parties that were subject to a substantial damages claim in respect
of work carried out in 2007 before it was acquired by the group. Damages were awarded against the company,
which were settled by the company's insurers. However, following an unsuccessful appeal the apportionment of
costs exceeded the insurance cover in place. The company entered into constructive dialogue with the other parties
to the claim, which resulted in a negotiated settlement. The total cost to the group, including costs, was £0.7m.
In 2013 the company settled a sub-contractor claim against the group for work carried out in previous years,
resulting in a cost to the group of £0.5m. Further costs amounting to £0.4 m have been incurred during 2014 in
seeking to reach a settlement of costs and interest in respect of this claim, and a potential counter claim by the
company against the subcontractor. Proceedings are ongoing in this matter, however the directors do not believe
there will be any significant additional costs to the group.
A subcontractor has over a period of time brought a number of adjudication claims against a subsidiary in respect
of a single contract. The company has been successful so far in defending these claims, but has incurred costs of
£0.1m (2013: £0.1m) in doing so.
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Notes to the financial statements for the year ended 31st December 2014
Note 8 – Employees
Staff costs
Staff costs during the year were as follows:
Wages and salaries
Share awards and options granted to directors and employees (see Note 19)
Termination costs
Social security costs
Other pension costs
Average number of employees:
– staff (including directors)
– operatives
2014
£m
49.4
0.2
0.1
5.3
1.3
56.3
365
872
1,237
2013
£m
45.6
–
0.3
5.0
1.0
51.9
292
908
1,200
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Notes to the financial statements for the year ended 31st December 2014
Note 9 – Taxation
Taxation expense
Current tax (credit) / expense
UK corporation tax payable on profits for the year
Adjustment for under provision in prior years
Deferred tax expense
Arising on:
Origination and reversal of temporary differences
Total income tax expense
Reconciliation of tax charge
(Loss) /profit before taxation for the year from continuing operations
Tax at standard UK tax rate of 21.5% (2013: 23.25%)
Tax effect of:
Permanently disallowable items
Adjustment for under provision in prior years
2014
£m
(0.1)
–
(0.1)
–
–
(0.1)
(0.7)
(0.1)
–
–
(0.1)
2013
£m
0.6
0.1
0.7
(0.1)
(0.1)
0.6
1.7
0.4
0.1
0.1
0.6
The main rate of corporation tax was reduced from 24% to 23% on 1st April 2013.
Further reductions in the main rate of corporation tax to 21% from 1st April 2014 and 20% from April 2015 had
been substantially enacted at 31st December 2013 and 31st December 2014 for the purposes of IAS12 ‘Income
Taxes’. The effect of these changes was to reduce the UK deferred tax asset at the balance sheet date by £0.2m.
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Notes to the financial statements for the year ended 31st December 2014
Note 10 – (Loss) / earnings per share
A. Basic (loss) / earnings per share
Basic (loss) / earnings per share is calculated by dividing the (loss) / profit attributable to owners of the company
by the weighted average number of ordinary shares in issue during the year.
(Loss) / earnings:
(Loss) / profit attributable to owners of the company
Weighted average number of ordinary shares in issue (000s)
2014
£m
(0.6)
41,402
2013
£m
1.1
41,402
B. Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding
to assume conversion of all dilutive potential ordinary shares. The company has three categories of dilutive
potential ordinary shares: share options granted under the Savings Related Share Option Scheme and conditional
share awards and options granted under the Equity Incentive Plan. Further details of these schemes are given in
Note 19.
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.
The potential ordinary shares are considered to be non-dilutive for the year ended 31st December 2014 as the
group incurred a loss.
(Loss) / earnings:
(Loss) / profit attributable to owners of the company
2014
£m
(0.6)
2013
£m
1.1
Weighted average number of ordinary shares in issue (000s)
41,402
41,402
Adjustments:
- Savings Related Share Option Schemes (000s)
- Equity Incentive Plan
Conditional share awards (000s)
Options (000s)
Weighted average number of ordinary shares for diluted earnings per share (000s)
535
833
41
42,811
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Notes to the financial statements for the year ended 31st December 2014
Note 10 – Earnings per share continued
C. Underlying earnings per share
Underlying earnings per share represents profit for the year from continuing operations adjusted for amortisation
of intangible assets and non-recurring items and the tax effect of these items, divided by the weighted average
number of shares in issue. Underlying earnings is the basis on which the performance of the operating divisions of
the business is measured.
(Loss) / profit from continuing operations attributable to owners of the company
Adjustments:
Amortisation of intangible assets
Non-recurring costs:
Exceptional claim settlement costs
Tax effect of adjustments
Underlying profit from continuing operations
2014
£m
(0.6)
0.2
1.2
(0.3)
0.5
2013
£m
1.1
0.3
0.6
(0.2)
1.8
Weighted average number of ordinary shares in issue (000s)
41,402
41,402
Adjustments:
- Savings Related Share Option Schemes (000s)
- Equity Incentive Plan:
Conditional share awards (000s)
Options (000s)
825
968
71
Weighted average number of ordinary shares for diluted earnings per share (000s)
43,266
Underlying earnings per share
Diluted underlying earnings per share
1.06p
1.01p
535
833
41
42,811
4.14p
4.00p
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Notes to the financial statements for the year ended 31st December 2014
Note 11 – Intangible assets
Goodwill
£m
Other
intangible
assets
£m
Cost:
At 1st January 2013, 31st December 2013 and 31st December 2014
24.2
Impairment and amortisation:
At 1st January 2013
Amortisation
At 31st December 2013
Amortisation
At 31st December 2014
Net book value:
1st January 2013
31st December 2013
31st December 2014
2.2
–
2.2
–
2.2
22.0
22.0
22.0
2.9
1.2
0.3
1.5
0.2
1.7
2.0
1.4
1.2
Total
£m
27.1
3.4
0.3
3.7
0.2
3.9
24.0
23.4
23.2
Goodwill relates to the purchase of subsidiary undertakings. Goodwill is not amortised but is tested for impairment
in accordance with IAS 36 ‘Impairment of assets’ at least annually or more frequently if events or changes in
circumstances indicate a potential impairment. Amortisation of other intangible assets is included in administrative
expenses in the income statement.
The significant elements of goodwill at 31st December 2014 are as follows:
TClarke Midlands
TClarke Scotland
TClarke North West
TClarke London
DG Robson Mechanical Services
TClarke East
Waldon Electrical Contractors
TClarke Leeds
Veale-Nixon
TClarke South East
Operating
segment
South
Scotland
North
South
South
South
South
North
North
South
£m
5.8
3.0
2.7
2.4
2.3
2.0
1.3
1.2
0.9
0.4
22.0
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Notes to the financial statements for the year ended 31st December 2014
Note 11 – Intangible assets continued
Value in use
The carrying value of goodwill has been compared to its recoverable amount based on the value in use of the cash
generating units (‘CGU’s) to which the goodwill has been allocated. Each operating company within the group has
been assessed as a separate CGU, being the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other groups of assets.
Value in use has been calculated using budgets and forecasts approved by the Board covering the period 2015 to
2017, which take into account secured orders, business plans and management actions. The results of period
subsequent to 2017 have been projected using 2017 forecasts with no growth assumed. The extrapolated cash
flow projections have been discounted using a pre-tax discount rate derived from the company’s cost of capital.
Assumptions
The key assumptions to which the assessment of the recoverable amounts of CGUs are sensitive are the projected
revenue and operating margin to 2017 and beyond, and the discount rate applied. The range of these assumptions
applied to the CGUs is as follows:
Pre-tax discount rate
Average annual revenue growth 2015 - 2017
South
North
Scotland
Average operating margins 2015 - 2017
South
North
Scotland
Average operating margins beyond 2017
South
North
Scotland
2014
13.21%
2013
11.69%
14.9%
5.4%
7.6%
11.2%
9.1%
17.4%
1.0%-3.3%
1.4%-2.8%
4.2%-4.5%
3.8%-4.2%
2.9%-3.6%
3.1%-3.4%
3.3%
4.5%
3.6%
2.8%
4.2%
3.4%
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Notes to the financial statements for the year ended 31st December 2014
Note 11 – Intangible assets continued
Sensitivities
Waldon Electrical Contractors and TClarke South-East are considered to be the CGUs most vulnerable to
impairment due to recent losses. The key assumptions used in respect of these CGUs are as follows:
Pre-tax discount rate
Annual revenue growth 2015 - 2017
Average operating margins 2015 - 2017
Operating margins beyond 2017
Waldon
Electrical
Contractors
13.21%
8.8%
1.9%
3.7%
TClarke
South East
13.21%
19.9%1
3.5%
4.2%
1 Based on actual 2014 revenue, which was significantly below previous years. Based on current order book and opportunities, management expect revenue
to return to more normal levels.
Annual revenue growth and operating margin assumptions are supported by an analysis of the secured order book
and opportunities identified by these CGUs, with TClarke South East having secured 79% of its forecast revenue
and Waldon Electrical Contractors 78% of its forecast revenue for 2015.
Sensitivity analysis has been applied to the cash flow projections for Waldon Electrical Contractors and TClarke
South East. The two assumptions to which the cash flow projections are most sensitive are the projected profit
(derived from the projected revenue and margins) and the discount rate. The amount by which these assumptions
would be required to change to trigger an impairment in respect of each of these CGUs is as follows:
Percentage point increase in pre-tax discount rate
Decrease in operating profit
Waldon
Electrical
Contractors
11.5%
51.6%
TClarke
South East
18.2%
61.9%
For other CGUs, management has considered the level of headroom resulting from the impairment tests, and
performed further sensitivity analysis by changing the base case assumptions applicable to each CGU. This analysis
has indicated that no reasonably possible changes in any individual key assumption would cause the carrying
amount of the CGU to exceed its recoverable amount.
At 31st December 2014, based on these valuations, no increase in the impairment provision was required against
the carrying value of goodwill (2013: £nil).
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Notes to the financial statements for the year ended 31st December 2014
Note 12 – Property, plant and equipment
GROUP
Cost or valuation
At 1st January 2013
Additions
Disposals
At 31st December 2013
Additions
Disposals
At 31st December 2014
Accumulated depreciation and impairment
At 1st January 2013
Charge for the year
Disposals
At 31st December 2013
Charge for the year
Disposals
At 31st December 2014
Net book value at 1st January 2013
Net book value at 31st December 2013
Net book value at 31st December 2014
Freehold
properties
£m
Leasehold
improvements
£m
Plant,
machinery
and vehicles
£m
4.4
–
–
4.4
–
(0.5)
3.9
0.1
0.1
–
0.2
0.1
(0.1)
0.2
4.3
4.2
3.7
0.4
–
–
0.4
0.2
–
0.6
0.1
0.1
–
0.2
0.1
–
0.3
0.3
0.2
0.3
4.1
0.4
(0.4)
4.1
0.3
(1.0)
3.4
2.8
0.4
(0.4)
2.8
0.4
(0.8)
2.4
1.3
1.3
1.0
Total
£m
8.9
0.4
(0.4)
8.9
0.5
(1.5)
7.9
3.0
0.6
(0.4)
3.2
0.6
(0.9)
2.9
5.9
5.7
5.0
The group’s freehold land and buildings were valued at 31st December 2011 based on an external valuation
provided by an independent valuer dated 14th October 2011. The external valuation was conducted on the basis
of market value as defined by the RICS Valuation Standards, and was determined by reference to recent market
transactions on arms length terms. The revaluation surplus, net of applicable deferred income taxes, was credited
to other comprehensive income and is shown in the revaluation reserve in shareholders’ equity. The net book value
of the freehold properties on a historic cost basis would have been £2.7m (2013: £3.2m).
The net book value of group plant, machinery and vehicles includes £0.1m (2013: £0.1m) in respect of assets held
under finance leases and hire purchase contracts. Depreciation of £0.1m (2013: £0.1m) was charged on these
assets during the year.
The group has granted a charge in favour of the TClarke Group Retirement and Death Benefits Scheme over a
number of properties occupied by the group, to secure the future pension obligations of the scheme. The book and
fair value of the properties at 31st December 2014 was £2.9m (2013: £3.1m).
119
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Notes to the financial statements for the year ended 31st December 2014
Note 12 – Property, plant and equipment continued
COMPANY
Cost
At 1st January 2013
Additions
At 31st December 2013
Additions
At 31st December 2014
Accumulated depreciation and impairment
At 1st January 2013
Charge for the year
At 31st December 2013
Charge for the year
At 31st December 2014
Net book value at 1st January 2013
Net book value at 31st December 2013
Net book value at 31st December 2014
Leasehold
improvements
£m
Plant,
machinery
and vehicles
£m
0.4
–
0.4
–
0.4
0.1
0.1
0.2
–
0.2
0.3
0.2
0.2
0.5
0.1
0.6
0.1
0.7
0.4
0.1
0.5
0.1
0.6
0.1
0.1
0.1
Total
£m
0.9
0.1
1.0
0.1
1.1
0.5
0.2
0.7
0.1
0.8
0.4
0.3
0.3
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Notes to the financial statements for the year ended 31st December 2014
Note 13 – Investments
COMPANY
Investments in subsidiaries comprise:
Cost:
At 1st January and 31st December
Impairment:
At 1st January and 31st December
Net book value:
At 1st January
At 31st December
2014
£m
2013
£m
41.4
41.4
9.0
9.0
32.4
32.4
32.4
32.4
An annual impairment review is undertaken at 31st December each year in conjunction with the goodwill
impairment review (see Note 11), using the same underlying cash flow projections and other key assumptions.
The impairment provision comprises the entire cost of subsidiaries where operations have ceased, or a reduction to
recoverable amount where there has been a significant reduction in underlying trading and significant losses have
been incurred such that the group is unable to recover the cost of the investment through its net asset value or
future trading. The provision also includes an amount equivalent to dividends paid out of pre-acquisition reserves in
respect of TClarke North West Limited.
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Notes to the financial statements for the year ended 31st December 2014
Note 14 – Inventories
GROUP
Raw materials
2014
£m
0.4
2013
£m
0.4
Note 15 – Construction contracts
Contract work in progress comprises:
Contract costs incurred plus recognised profits
less recognised losses to date
Less: progress payments
Contracts in progress at the reporting date:
Gross amounts due from customers
Gross amounts due to customers
GROUP
COMPANY
2014
£m
2013
£m
2014
£m
2013
£m
147.7
(123.9)
23.8
26.7
(2.9)
23.8
169.4
(146.5)
22.9
25.2
(2.3)
22.9
73.5
(60.8)
12.7
13.4
(0.7)
12.7
91.6
(81.4)
10.2
10.8
(0.6)
10.2
At 31st December 2014 retentions held by customers of the group for contract work amounted to £10.6m (2013:
£9.6m) and retentions held by customers of the company for contract work amounted to £3.7m (2013: £3.5m).
These amounts are included in trade receivables (see Note 16).
Advances received from customers for contract work amounted to £nil (2013: £nil).
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Notes to the financial statements for the year ended 31st December 2014
Note 16 – Trade and other receivables
GROUP
COMPANY
Trade receivables - gross
Trade receivables - allowances for credit losses
Net trade receivables
Owed by group companies
Other receivables
Accrued income
Prepayments
Movements in allowances for
credit losses are as follows:
At 1st January
Charged in year
Recovered in year
Written off in year
At 31st December
Trade receivables (including retentions)
are due as follows:
Due within 3 months
Due in 3 to 6 months
Due in 6 to 12 months
Due after more than one year
Overdue
The ageing of trade receivables past due
but not impaired is as follows:
Less than 30 days
31-60 days
61-120 days
Greater than 120 days
2014
£m
23.8
(0.9)
22.9
_
0.2
9.2
2.4
34.7
(0.7)
(0.6)
0.1
0.3
(0.9)
11.8
1.6
2.4
3.2
4.8
23.8
1.4
0.8
0.6
1.1
3.9
2013
£m
20.7
(0.7)
20.0
–
0.5
8.7
1.8
31.0
(0.6)
(0.3)
0.1
0.1
(0.7)
9.8
2.8
1.1
3.3
3.7
20.7
0.8
0.7
0.4
1.1
3.0
2014
£m
6.9
–
6.9
2.3
0.5
2.3
0.7
12.7
–
–
–
–
–
3.5
0.9
0.7
1.5
0.3
6.9
–
0.1
–
0.2
0.3
2013
£m
4.7
–
4.7
2.3
0.2
0.9
0.6
8.7
–
–
–
–
–
2.4
0.7
0.1
1.4
0.1
4.7
–
–
–
0.1
0.1
Allowances for credit losses have been assessed against individual debtor balances. Where overdue balances are
still considered to be recoverable in full no allowance has been made. The allowances mostly relates to small
building contractors who have become insolvent or are facing severe financial difficulties at present. Credit risk is
spread across a large number of customers and there are no significant concentrations of credit risk.
123
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Notes to the financial statements for the year ended 31st December 2014
Note 17 – Trade and other payables
GROUP
COMPANY
Current:
Trade payables
Owed to group companies
Other taxation and social security payable
Accruals
Deferred income
Other payables
Non-current:
Other payables
Trade payables payments terms are as follows:
30 days or less
31-60 days
Greater than 60 days
2014
£m
40.4
–
5.7
12.4
0.8
0.3
59.6
0.3
22.8
13.7
3.9
40.4
2013
£m
35.1
–
4.4
9.1
1.3
0.5
50.4
–
17.5
13.3
4.3
35.1
2014
£m
13.5
5.4
1.5
11.5
–
–
31.9
–
6.9
4.5
2.1
13.5
2013
£m
12.8
4.2
1.0
4.5
–
0.1
22.6
–
6.2
4.6
2.0
12.8
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Notes to the financial statements for the year ended 31st December 2014
Note 18 – Deferred taxation
GROUP
Asset at 1st January 2013
(Charge) / credit to income
Charged to other comprehensive income
Asset at 31st December 2013
Credited to other comprehensive income
Asset at 31st December 2014
Revaluations
£m
Retirement
benefit
obligation
£m
Accelerated
capital
allowances
£m
(0.2)
–
–
(0.2)
–
(0.2)
2.7
–
(0.5)
2.2
1.1
3.3
0.1
(0.1)
–
–
–
–
Other
£m
(0.4)
0.2
–
(0.2)
–
(0.2)
Total
£m
2.2
0.1
(0.5)
1.8
1.1
2.9
The amount of deferred tax recoverable within one year is insignificant. Certain deferred tax assets and liabilities
have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes.
Deferred tax liabilities
Deferred tax assets
COMPANY
Asset at 1st January 2013
Charged to other comprehensive income
Asset at 31st December 2013
Credited to other comprehensive income
Asset at 31st December 2014
2014
£m
(0.4)
3.3
2.9
Retirement
benefit
obligation
£m
2.7
(0.5)
2.2
1.1
3.3
2013
£m
(0.4)
2.2
1.8
Total
£m
2.7
(0.5)
2.2
1.1
3.3
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Notes to the financial statements for the year ended 31st December 2014
Note 19 – Capital and reserves
A. Components of owners equity
The nature and purpose of the components of owners equity are as follows:
Component of owners equity
Description and purpose
Share capital
Share premium
ESOT share reserve
Revaluation reserve
above depreciated cost
Retained earnings
B. Share capital and premium
Authorised:
Ordinary share of 10p each:
Amount subscribed for share capital at nominal value.
Amount subscribed for share capital in excess of nominal value,
net of allowable expenses.
Acquires and holds shares in the company to be issued to employees
in settlement of options exercised and conditional share awards under
the group’s employee share schemes.
Cumulative gains recognised on revaluation of land and buildings
Cumulative net gains and losses recognised in the income statement
and the statement of comprehensive income to the extent not
distributed by way of dividends.
Number
of shares
Ordinary
shares
£m
At 1st January 2013, 31st December 2013 and 31st December 2014
50,000,000
5.0
Allotted, called up and fully paid:
Number
of shares
At 1st January 2013, 31st December 2013 and 31st December 2014
41,401,670
Ordinary
shares
£m
4.1
Share
premium
£m
3.1
All shares rank equally in respect of shareholder rights.
Changes in the number of allotted, called up and fully paid ordinary shares of 10p each since 31st December 2014
are disclosed on page 127.
126
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Notes to the financial statements for the year ended 31st December 2014
Note 19 – Capital and reserves continued
C. Employee share option plan of the company
The following options granted to employees and directors of the group under the TClarke plc Savings Related
Share Option Scheme (‘the SAYE scheme’), an approved save as you earn (‘SAYE’) share option scheme, were
outstanding at the end of the year.
Scheme
2011 SAYE
2012 SAYE
2013 SAYE
Number
of options
Grant
date
Exercise
date
1,246,950
8/11/11
01/01/15
Exercise
price
40.00p
Fair value at
date of grant
13.00p
to 30/06/15
753,857
12/10/12
01/01/16
42.00p
8.90p
to 30/06/16
481,267
11/10/13
01/01/17
54.00p
18.55p
to 30/06/17
The SAYE scheme was approved by HM Revenue and Customs on 14th July 2011. In accordance with the scheme
rules all employees of the group with at least six months continuous service were eligible to participate in the
scheme, the only vesting condition being that the individual remains an employee of the group over the savings
period. The impact of recognising the fair value of employee share option plan grants as an expense under IFRS2
is £0.1m for the year ended 31st December 2014 (2013: £nil). The scheme is open to all eligible employees
including the executive directors. Under the rules of the scheme all participating employees have entered into
an approved Save As You Earn contract (‘SAYE contract’) under which the employee agrees to make monthly
contributions of between £5 and £75 per month in respect of the 2011 scheme and between £5 and £150 in
respect of the 2012 and 2013 schemes for a period of three years, at the end of which the employee may use part
or all of the proceeds to acquire the shares under option. Options will be exercisable within a period of six months
commencing on the date of maturity of the participants SAYE contract. No options were granted during the year
under the SAYE scheme.
127
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Notes to the financial statements for the year ended 31st December 2014
Note 19 – Capital and reserves continued
C. Employee share option plan of the company continued
The volatility was measured at the standard deviation of continuously compounded share returns based on
statistical analysis of daily prices over the last year. Each employee share option converts into one ordinary share
of the company on exercise.
The number of options outstanding during the year were as follows:
At 1st January
Granted
Exercised
Forfeited
At 31st December
2014
Weighted
average
exercise
price (p)
2014
Number
2013
Number
2,615,803
43.28
2,256,370
–
–
(133,729)
2,482,074
–
–
42.45
43.32
498,381
(3,940)
(135,008)
2,615,803
2013
Weighted
average
exercise
price (p)
41.84
54.00
40.10
40.73
43.28
The weighted average remaining contractual life of the options at 31st December 2014 was 252 days
(2013: 615 days).
No options were exercisable at 31st December 2014 (2013: nil).
On 1st January 2015, 1,246,950 options granted under the SAYE Scheme became exercisable at an exercise price
of 40p per 10p ordinary share. Options exercised to date have been satisfied by a combination of shares held in
treasury by the Employee Share Ownership Trust and the issue of 427,897 new 10p ordinary shares.
The total issued share capital of the company at the date of this report comprises 41,829,577 10p ordinary shares.
128
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Notes to the financial statements for the year ended 31st December 2014
Note 19 – Capital and reserves continued
D. Equity Incentive Plan (‘the Plan’)
All employees, including executive directors, are eligible to participate in the TClarke Equity Incentive Plan (‘the
Plan’) at the discretion of the Remuneration Committee. Awards may be made in the form of approved options,
unapproved options, conditional awards of shares and matching awards of shares. Awards may be made in the
six-week periods after adoption of the Plan and after the announcement of the group’s interim or final results.
No award may be made more than ten years after the date on which the Plan was approved by shareholders
(11th May 2011). Options and awards of shares are subject to performance conditions as determined by the
Remuneration Committee.
The total number of shares issued or made available pursuant to the Plan, when aggregated with the total number
of shares issued or made available pursuant to any other employee share scheme in the ten years immediately
preceeding the date upon which an award is made, shall not exceed ten percent of the company’s issued share
capital at the date of the grant.
945,000 conditional share awards and 354,000 conditional options have been granted under the TClarke Equity
Incentive Plan as follows:
Date of grant
Number of awards
Share price at grant
Exercise price
Option life
Conditional
shares
Conditional
options
Conditional
shares
Conditional
options
Conditional
shares
01/05/2012
01/05/2012
30/04/2013
30/04/2013
29/04/2014
345,000
50.25p
nil
3 years
177,000
50.25p
50.25p
3 years
345,000
52.00p
nil
3 years
177,000
52.00p
52.00p
3 years
255,000
82.00p
nil
3 years
The conditional share awards and options will vest on the third anniversary of the date of grant, subject to
continued employment with the company and satisfaction of the following performance conditions:
Annual growth in EPS above RPI
Proportion of award vesting
Less than 3%
3%
Between 3% and 10%
Above 10%
Nil
25%
Between 25% and 100% on a straight line basis
100%
The charge to the income statement takes into account the number of shares and options that are expected to
vest. The impact of recognising the fair value of Equity Incentive Plan grants as an expense under IFRS2 is £0.1m
for the year ended 31st December 2014 (2013: £nil).
129
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Notes to the financial statements for the year ended 31st December 2014
Note 19 – Capital and reserves continued
E. Company income statement
The company has taken advantage of the exemption conferred by section 408 of the Companies Act 2006
from presenting its own income statement. A loss after taxation amounting to £0.8m (2013: profit £2.0m) has
been included in the financial statements of the holding company.
F. Dividends paid
Final dividend of 2.10p (2013: 2.00p) per ordinary share proposed and
paid during the year relating to the previous year’s results
Interim dividend of 0.50p (2013: 1.00p) per ordinary share paid during the year
2014
£m
0.9
0.2
1.1
2013
£m
0.8
0.4
1.2
The directors are proposing a final dividend of 2.60p (2013: 2.10p) per ordinary share totalling £1.1m (2013:
£0.9m). This dividend has not been accrued at the reporting date.
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Notes to the financial statements for the year ended 31st December 2014
Note 20 – Notes to the statement of cash flows
A. Reconciliation of operating profit to net cash (outflow) / inflow from operating activities
GROUP
Profit from operations:
Continuing operations
Depreciation charges
Profit on sale of property, plant and equipment
Equity settled share based payment expense
Amortisation
Defined benefit pension scheme credit
Operating cash flows before movements in working capital
Increase in inventories
Increase in contract balances
(Increase) / decrease in trade and other receivables
Increase in trade and other payables
Cash generated by / (used in) operations
Corporation tax paid
Interest paid
Net cash generated by / (used in) operating activities
COMPANY
Loss / (profit) from operations:
Continuing operations
Equity settled share based payment expense
Depreciation charges
Defined benefit pension scheme credit
Operating cash flows before movements in working capital
Increase in contract balances
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Cash used in operations
Corporation tax received
Interest paid
Net cash used in operating activities
131
Annual Report & financial statements 2014
2014
£m
–
0.6
(0.2)
0.2
0.2
(0.4)
0.4
–
(0.9)
(3.7)
9.5
5.3
–
(0.3)
5.0
(3.0)
0.2
0.1
(0.4)
(3.1)
(2.5)
(4.0)
9.2
(0.4)
0.2
(0.3)
(0.5)
2013
£m
2.3
0.6
–
–
0.3
(0.3)
2.9
(0.1)
(13.1)
5.0
3.6
(1.7)
(0.8)
(0.1)
(2.6)
–
–
0.2
(0.3)
(0.1)
(3.8)
4.6
(4.9)
(4.2)
0.8
(0.1)
(3.5)
TCK-REPORT-pages 61-144 REPRO-X_Layout 1 27/03/2015 20:48 Page 132
Notes to the financial statements for the year ended 31st December 2014
Note 20 – Notes to the statement of cash flows continued
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.
Cash and cash equivalents
GROUP
COMPANY
2014
£m
10.3
2013
£m
1.0
2014
£m
6.2
2013
£m
0.5
Note 21 – Bank overdrafts & loans
The group has an £8m overdraft facility with National Westminster Bank plc, renewable annually. Interest was
charged at 2.75% above base rate on overdraft balances during the year ended 31st December 2014 (2013:
2.5%). All operating companies within the group are included within the facility, and cross guarantees and charges
have been granted in favour of National Westminster Bank plc. At 31st December 2014 the group had unused
overdraft facilities of £8m (2013: £8m). No value has been attributed to the guarantee contracts in the company’s
financial statements as the amount is considered to be negligible.
In February 2014 the group arranged a £5m committed three year Revolving Credit Facility (RCF) with National
Westminster Bank plc (“the bank”). The RCF incurs interest at 3% above LIBOR on drawn balances and the
company is charged a fee of 1.5% on all undrawn balances. The RCF includes financial covenants around interest
cover and net leverage ratios which are tested quarterly.
The group was compliant with its obligations under the RCF at 31st December 2014, however the following
breaches and potential breaches occurred during the year:
• During the year ended 31st December 2014 the group breached its obligations under the terms of the RCF by
failing to notify the bank in a timely manner of an award of damages against the group. The group sought and
obtained a waiver of this breach during the year.
• Also, following the settlement during the year of a contractual dispute in the group’s Mission Critical division
which resulted in the group recognising a significant loss on the contract concerned, the group informed the
bank that it would be unable to meet the interest cover covenant at 31st December 2014 and requested in
advance a waiver of this covenant. The terms of the RCF were subsequently varied before the year-end to
remove the interest cover test for the quarter ended 31st December 2014, therefore no breach occurred.
132
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Notes to the financial statements for the year ended 31st December 2014
Note 22 – Related party transactions
A. Directors remuneration
Salaries, fees and other short-term employee benefits
Post-employment benefits
Total
2014
£m
0.9
0.1
1.0
Further disclosures, including details of the highest paid director, are included in the Remuneration Report on
pages 68 to 79.
B. Key management remuneration
Compensation payable to key management for employee services is shown below. Key management includes
members of the group management board and directors of subsidiary companies.
Salaries, fees and other short term employee benefits
Termination benefits
Post-employment benefits
Total
2014
£m
3.1
0.1
0.4
3.6
2013
£m
0.8
0.1
0.9
2013
£m
3.1
0.1
0.4
3.6
C. Other transactions with key management
In January 2013 the group paid £0.4m to the vendors of DG Robson Mechanical Services Limited as deferred
consideration for the acquisition of the company in August 2010. The vendors of DG Robson Mechanical Services
Limited are members of key management. The amount of the deferred consideration was contingent on post-
acquisition results. £0.2m was accrued at the time of acquisition and a further £0.2m charged to the income
statement in the year ended 31st December 2012.
D. Sales and purchases of goods and services to / from subsidiaries
The amounts due from and to subsidiaries are disclosed in Notes 16 and 17 respectively. All balances are repayable
on demand.
TClarke plc charged subsidiary companies £0.5m (2013: £0.5m) during the year for insurance services and £0.2m
(2013: £0.2m) for IT services. Sales to other group companies of £nil (2013: £0.6m) and cost of sales from other
group companies of £15.1m (2013: £10.9m) are included in the financial statements of the company.
133
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Notes to the financial statements for the year ended 31st December 2014
Note 23 – Pension commitments
Defined contribution schemes
The group operates defined contribution pension schemes for all qualifying employees of all its operating
companies. The assets of these schemes are held separately from those of the group in funds under the control
of the trustees.
The total cost charged to income of £0.6m (2013: £0.5m) represents contributions payable to these schemes by
the group at rates specified in the rules of the separate plans.
Defined benefit scheme
The group operates a funded defined benefit scheme for qualifying employees. The scheme is registered with
HMRC and is administered by the trustees.
With effect from 1st March 2010 the benefit structure was altered 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. No other post-retirement
benefits are provided. The assets of the scheme are held separately from those of the participating companies.
The most recent triennial actuarial valuation of the scheme, carried out at 31st December 2012 by Mr J Seed,
Fellow of the Institute of Actuaries, showed a deficit of £11.5m, which represented a funding level of 68%. The
valuation was significantly impacted by the significant fall in bond yields over the period leading up to the date of
the valuation, caused by macro-economic factors beyond the company’s control. A deficit reduction plan has been
agreed with the Pension Regulator, which includes making additional contributions and providing security in the
form of a contingent asset over the group’s property portfolio up to a combined value of £3.1m, with the aim of
eliminating the deficit by 31st March 2029.
Employer contribution rates during the year ended 31st December 2014 were 18.0% (2013:16%). Future employer
contributions rates have been agreed as follows:
1st January 2015 to 31st December 2016
1st January 2017 to 31st December 2019
1st January 2020 to 31st March 2029
Current service
contributions
Deficit
reduction
contributions
Total
contributions
7.7%
7.7%
7.7%
13.0%
14.0%
15.0%
20.7%
21.7%
22.7%
Following further adverse movements in bond yields since the date of the triennial actuarial valuation, the group
has taken action to close the defined benefit scheme to new members and is working with the trustees of the
scheme and their advisers to mitigate the impact of the prolonged adverse economic conditions. The group
continues to meet its ongoing funding obligations to the scheme.
134
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Notes to the financial statements for the year ended 31st December 2014
Note 23 – Pension commitments
The key assumptions used to value the pension scheme liability in the financial statements are set out below:
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Inflation assumption
The mortality assumptions used in the IAS 19 valuation were:
Life expectancy at age 65 for current pensioners
- Men
- Women
Life expectancy at age 65 for future pensioners (current age 45)
- Men
- Women
The amounts recognised in the statement of financial position are as follows:
Present value of funded obligations
Fair value of plan assets
Deficit of funded plans
2014
%
2.70
3.00
3.70
3.20
2014
Years
23.7
24.9
25.0
26.4
2014
£m
44.5
(28.2)
16.3
2013
%
4.05
3.20
4.65
3.55
2013
Years
23.6
24.8
24.9
26.4
2013
£m
37.8
(26.9)
10.9
135
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 23 – Pension commitments continued
The movement in the defined benefit obligation is as follows:
Present value
of obligation
Fair value of
plan assets
At 1st January 2013
Current service cost
Interest expense
Remeasurements:
Return on plan assets excluding amounts included in interest expense
Loss from change in financial assumptions
Experience gains
Contributions:
- Employers
- Employees
Payment from plans:
- Benefit payments
At 31st December 2013
Current service cost
Interest expense
Remeasurements:
Return on plan assets excluding amounts included in interest expense
Loss from change in financial assumptions
Experience (gains)/losses
Contributions:
- Employers
- Employees
Payment from plans:
- Benefit payments
At 31st December 2014
37.0
0.5
1.7
2.2
–
1.7
(2.5)
(0.8)
–
0.4
(1.0)
37.8
0.6
1.7
2.3
–
5.5
–
5.5
–
0.4
(1.5)
44.5
(25.1)
–
(1.2)
(1.2)
(0.4)
–
–
(0.4)
(0.8)
(0.4)
1.0
(26.9)
–
(1.2)
(1.2)
(0.2)
–
–
(0.2)
(1.0)
(0.4)
1.5
(28.2)
Current service cost is included in administrative expenses.
Interest expense is included in finance costs.
Remeasurement gains and losses have been included in other comprehensive income/expense.
136
Annual Report & financial statements 2014
Total
11.9
0.5
0.5
1.0
(0.4)
1.7
(2.5)
(1.2)
(0.8)
–
–
10.9
0.6
0.5
1.1
(0.2)
5.5
–
5.3
(1.0)
–
–
16.3
TCK-REPORT-pages 61-144 REPRO-X_Layout 1 27/03/2015 20:48 Page 137
Notes to the financial statements for the year ended 31st December 2014
Note 23 – Pension commitments continued
Plan assets are held in professionally managed multi asset funds, cash and bank accounts managed by the
trustees, and an insurance annuity contract. Plan assets are comprised as follows:
2014
2013
Equities
UK quoted
Overseas quoted
Hedge funds
Debt instruments
Fixed interest corporate bonds
Inflation-linked bonds
Government bonds
Property
Cash
Insurance annuity contracts
Total
Quoted
£m
Unquoted
£m
17.0
4.6
5.1
7.3
5.1
4.2
0.3
0.6
–
–
–
22.1
–
–
–
–
–
–
–
–
2.3
2.2
1.6
6.1
Total
£m
17.0
%
60%
4.6
5.1
7.3
5.1
4.2
0.3
0.6
2.3
2.2
1.6
18%
8%
8%
6%
Quoted
£m
Unquoted
£m
Total
£m
%
15.6
5.9
3.7
6.0
6.6
5.9
0.1
0.6
–
–
–
–
–
–
–
–
–
–
–
1.3
1.7
1.7
4.7
15.6
58%
5.9
3.7
6.0
6.6
5.9
0.1
0.6
1.3
1.7
1.7
25%
5%
6%
6%
26.9
100%
28.2
100%
22.2
Through the defined benefit pension scheme the group is exposed to a number of risks, the most significant of
which are set out below.
Asset volatility
The objective of the investment strategy is to have sufficient assets to pay benefits to members as they fall due.
The scheme assets are invested in a diversified portfolio of growth assets (such as multi-asset funds and equities)
and matching assets (such as bonds held in multi-asset funds and cash). In addition the scheme holds a number
of annuity policies which are used to back a number of pensions in payment, reducing the volatility of the results.
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If plan assets
underperform this yield, this will create a deficit. A significant proportion of scheme assets are held in equities,
which are expected to outperform bond yields in the long term while providing volatility and risk in the short term.
The group believes that due to the long term nature of scheme liabilities and the strength of the group, it is
appropriate to continue to hold a significant proportion of the assets in equities. The proportion of equities held
was increased following a review of the investment strategy and taking into account expected improvements in
equity markets and the maturity profile of the scheme.
Change in corporate bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase
in the value of the scheme’s bond holdings.
137
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 23 – Pension commitments continued
Inflation risk
Some of the pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. Caps are in
place for inflationary increases which protect the scheme against the impact of extreme inflation. The majority of
the plan’s assets are largely unaffected by inflation, meaning that any increase in inflation will also increase the
deficit.
Life expectancy
Pension obligations are payable for the life of the member, and where elected by the member, the member’s
spouse. Increases in life expectancy will result in increases in scheme liabilities.
Age profile
The weighted average duration of the unsecured liabilities is approximately 24 years.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Inflation rate
Life expectancy
Impact on defined benefit obligation
Change in
assumption
0.5%
0.5%
Increase in
assumption
Decrease in
assumption
Decreased by 10%
Increased by 12%
Increase by 6%
Decrease by 8%
Increase by 1 year
in assumption
Decrease by 1 year
in assumption
Increase by 3%
Decrease by 3%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When
calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method
(present value of the defined benefit obligation calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the pension liability recognised within the statement of
financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the
previous period.
138
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 24 – Obligations under finance leases
Amounts payable under finance leases:
Within one year
Less: future finance charges
Present value of lease obligations
Minimum lease payment
Present value of
minimum lease payment
2014
£m
0.1
0.1
–
0.1
2013
£m
0.1
0.1
–
0.1
2014
£m
0.1
0.1
–
0.1
2013
£m
0.1
0.1
–
0.1
The average lease term is three to four years. For the year ended 31st December 2014 the average effective
borrowing rate was 6% (2013: 6%). Interest rates are fixed at the contract dates. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent rental payments.
Obligations under finance leases are secured by the lessor's charges over the leased assets.
Note 25 – Operating lease obligations
Total outstanding commitments for future minimum lease payments under non-cancellable operating leases
fall due as follows:
GROUP
Within one year
In the second to fifth years inclusive
COMPANY
Within one year
In the second to fifth years inclusive
Land and
buildings
2014
£m
0.4
0.4
0.8
Land and
buildings
2014
£m
0.3
0.2
0.5
Other
operating
leases
2014
£m
1.1
1.1
2.2
Other
operating
leases
2014
£m
0.4
0.3
0.7
Land and
buildings
2013
£m
0.4
0.6
1.0
Land and
buildings
2013
£m
0.3
0.5
0.8
Other
operating
leases
2013
£m
0.9
1.3
2.2
Other
operating
leases
2013
£m
0.3
0.4
0.7
139
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 26 – Contingent liabilities
Group banking facilities and surety bond facilities are supported by cross guarantees given by the company and
participating companies in the group. There are contingent liabilities in respect of surety bond facilities and
guarantees under contracting and other arrangements entered into in the normal course of business.
Note 27 – Financial instruments
A. Capital risk management
The group manages its capital to ensure that each entity within the group will be able to continue as a going
concern; to maintain a strong financial position to support business development, tender qualification
and procurement activities; and to maximise the overall return to shareholders over time. Dividends form an
important part of the overall return to shareholders. The group is mindful of the need to ensure that the dividend is
covered by earnings over the business cycle and paid out of cash reserves in order to secure the long-term interests
of shareholders. The Board considers that it has sufficient capital to undertake its activities for the foreseeable future.
The group’s overall capital strategy remains unchanged from 2013.
The capital structure of the group consists of net funds, including cash and cash equivalents, bank loans and
overdrafts and finance lease obligations, and equity attributable to equity holders of the parent company, comprising
issued capital, reserves and retained earnings. The group does not use derivative financial instruments.
The capital structure of the group at 31st December 2014 and 2013 was as follows:
Cash and cash equivalents
Less total borrowings
Net funds
Total equity
2014
£m
10.3
(5.1)
5.2
2013
£m
1.0
(0.1)
0.9
18.9
24.7
140
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 27 – Financial instruments continued
B. Financial assets and liabilities
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the bases of
measurement and the bases on which income and expenses are recognised in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 3. The fair value of the group’s and the company’s
financial assets and financial liabilities is not materially different to the carrying value.
Financial assets
The group’s financial assets comprise loans and receivables at amortised cost, and cash and cash equivalents as
follows:
2014
£m
2013
£m
Cash and cash equivalents
Trade and other receivables excluding prepayments
Amounts due from customers under construction contracts
10.3
32.3
26.7
69.3
Included in the above are £3.2 m (2013: £3.3m) trade and other receivables due after more than one year.
Financial liabilities – analysis of maturity dates
At 31st December 2014 the carrying value of the group’s financial liabilities and the maturity profile of the
associated contractual cash flows were as follows:
31st December 2014
Carrying value
Contractual cash flows:
Less than one year
One to two years
Two to three years
Total
31st December 2013
Carrying value
Contractual cash flows:
Less than one year
Amounts due
to customers
under
construction
contracts
£m
Trade
and other
payables1
£m
Bank loans2
£m
Obligations
under finance
leases
£m
53.4
53.1
0.2
0.1
53.4
44.7
44.7
2.9
2.9
-
-
2.9
2.3
2.3
5.0
0.2
0.2
5.2
5.6
–
–
0.1
0.1
-
-
0.1
0.1
0.1
1 Trade and other payables exclude deferred income and other taxation and social security payable.
2 Details of the group’s bank facilities are given in Note 21 on page 132.
1.0
29.2
25.2
55.4
Total
£m
61.4
56.1
0.2
5.1
61.4
47.1
47.1
141
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 27 – Financial instruments continued
C. Financial risk management
Financial risk management is integral to the way
in which the group is managed. The overall aim of
the group’s financial risk management policies is to
minimise any potential adverse effects on financial
performance and net assets.
The group does not enter into any derivative
transactions and has minimal exposure to exchange
rate movement as its trade is based in the United
Kingdom.
The financial risks to which the group is exposed
comprise credit risk, market risk and liquidity risk.
The group seeks to manage these risks as follows:
Credit risk
Credit risk is the risk that a counter party will fail to
discharge its obligations and create a financial loss.
Credit risk exists, amongst other factors, to the extent
that at the reporting date there were significant
balances outstanding. The group’s policy is to mitigate
this risk by assessing the credit-worthiness of
prospective clients prior to accepting a contract,
requesting progress payments on contract work in
progress and investing surplus cash only with large
highly-regarded UK financial institutions.
The carrying value of construction contracts, trade and
other receivables and cash on deposit represents the
group’s maximum exposure to credit risk. There were
no significant concentrations of credit risk at 31st
December 2014.
Liquidity risk
Liquidity risk is the risk that the group will not
generate sufficient cash and liquid funds to be able
to settle its financial liabilities as and when they fall
due. The group’s manages liquidity risk by maintaining
adequate reserves and banking facilities, by
monitoring cash flows and by matching the maturity
profiles of financial assets and liabilities within the
bounds of its contractual obligations.
The group had in place throughout the year an
£8 million overdraft facility with National Westminster
Bank plc. This facility was renewed and an additional
£5 million Revolving Credit Facility (‘RCF’) agreed
with the same bank in February 2014. The RCF is a
committed facility available until 31st March 2017,
subject to quarterly financial covenant tests.
Management has prepared projections for the
remaining term of the RCF that demonstrate that the
group will be able to meet these financial covenants.
There have been no other significant changes to the
nature of financial risks or the group’s objectives and
policies for managing these risks.
Based on an interest rate of 3.5%, the effect of a
delay / acceleration in the maturity of the group’s
trade receivables at the balance sheet date would be
to decrease / increase profit by approximately £0.1
million (2013: £0.1 million) for each month of delay /
acceleration, and the effect of a delay / acceleration
in the maturity of the group’s trade payables at the
reporting date would be to increase / decrease profit
by approximately £0.1 million (2013: £0.1 million) for
each month of delay / acceleration.
Cash flow interest rate risk
The group is exposed to changes in interest rates
on its bank deposits and borrowings. Surplus cash is
placed on short term deposit at fixed rates of interest.
Bank overdrafts are at floating rates, at a fixed margin
of 2.75% above base rates. The interest rate on
amounts drawn down under the RCF are fixed at
LIBOR plus 3% at the time of drawdown for periods of
up to six months. The group’s finance lease obligations
are at fixed rates of interest determined at the
inception of the lease.
The effect of each 1% increase in interest rates on the
group’s floating and short-term fixed rate cash, cash
equivalents and bank overdrafts at the reporting date
would be to increase profits by approximately £0.5
million (2013: £0.1 million) per annum. Details of the
group’s and the company’s bank facilities are disclosed
in Note 21.
Details of finance lease commitments are disclosed in
Note 24.
142
Annual Report & financial statements 2014
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Notes to the financial statements for the year ended 31st December 2014
Note 28 – Subsidiary companies
The wholly owned trading subsidiaries are all directly held by TClarke plc. The trading subsidiaries are all
incorporated and operate within the United Kingdom.
Electrical and mechanical contractors
Type of shares
DG Robson Mechanical Services Limited
TClarke (Bristol) Limited
TClarke East Limited
TClarke Leeds Limited
TClarke (Midlands) Limited
TClarke North West Limited
TClarke (Scotland) Limited
TClarke South-East Limited
Veale-Nixon Limited
Waldon Electrical Contractors Limited
Property holding company
Weylex Properties Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Note 29 – Post balance sheet events
Since 31st December 2014, 427,897 ordinary shares of 10p each have been issued in connection with the exercise
of options under the TClarke plc Savings Related Share Option Scheme (“the Scheme”). Further details of the
Scheme are given in Note 19 on pages 126 to 127.
Printed on Regency Velvet
The paper is independently certified according to the rules of the Forestry
Stewardship Council® (FSC®). The manufacturing mill holds the ISO 14001
environmental certification and the EU Eco-label (EMAS).
Designed and produced by s a l l y b a m b e r
143
Annual Report & financial statements 2014
TCK-REPORT-pages 61-144 REPRO-X_Layout 1 27/03/2015 20:48 Page 144
www.tclarke.co.uk
London
TClarke Head Office
Group Chief Executive
Mark Lawrence
45 Moorfields
London EC2Y 9AE
T: 020 7997 7400
London
DGR Mechanical
Managing Director
Danny Robson
45 Moorfields
London EC2Y 9AE
T: 020 7997 7550
Aberdeen
TClarke
Managing Director
Gary Jackson
Westpoint House
Prospect Road
Arnhall Business Park
Aberdeen AB32 6FE
T: 01224 729 800
Accrington
TClarke
Managing Director
Andy Smith
Junction 7 Business Park
Blackburn Road
Clayton-le-Moors
Accrington
Lancashire BB5 5JW
T: 01254 302 600
Bristol
TClarke
Managing Director
Ellis John
Unit No.1
Montpelier Business Park
Station Road
Montpelier
Bristol BS6 5EE
T: 01179 440 550
Cardiff
TClarke
Director
Mark Clark
10 Neptune Court
Ocean Way
Cardiff CF24 5PJ
T: 02920 570800
Colchester
TClarke
Director
Paul Barnes
Suite 2
The Commodity Centre
Great Braxted
Essex CM8 3EW
T: 020 3693 1776
Derby
TClarke
Managing Director
Kevin Bones
Windsor Court
Ascot Drive
Derby
Derbyshire DE24 8GZ
T: 01332 332 177
Falkirk
TClarke
Managing Director
Gary Jackson
6 Middlefield Road
Falkirk FK2 9AG
T: 01324 888 000
Harlow
DGR Mechanical
Managing Director
Richard Exell
Unit 14
Kingston Farm
Industrial Units
Harlow
Essex CM17 0RB
T: 01279 730 997
Huntingdon
TClarke
Managing Director
Ray White
Bicton Industrial Park
Kym Road
Kimbolton
Huntingdon
Cambridgeshire PE28 0LW
T: 01480 861 544
Leeds
TClarke
Managing Director
Kevin Mullen
Low Hall Road
Horsforth
Leeds
West Yorkshire LS18 4EF
T: 01132 586 711
Newcastle
Veale-Nixon
Managing Director
Kevin Mullen
Hunter House
17-19 Byron Street
Newcastle upon Tyne
NE2 1XH
T: 01912 612 727
Peterborough
TClarke
Managing Director
Kevin Bones
Fengate
Peterborough PE1 5XB
T: 01733 342 624
Plymouth
TClarke
Managing Director
Rob Faro
Falcon Business Centre
Falcon House
Eagle Road
Langage
Plymouth
Devon PL7 5JY
T: 01752 349 752
Sittingbourne
TClarke
Managing Director
Steve Goldsmith
Excelsior House
Ufton Lane
Sittingbourne
Kent ME10 1JA
T: 01795 427 181
St Austell
Waldon TClarke
Managing Director
Rob Faro
20 St Austell Business Park
Carclaze
St Austell
Cornwell PL25 4FP
T: 01726 656 35
144
Annual Report & financial statements 2014
TCK-COVER-X-REPRO_TC 27/03/2015 20:41 Page 2
Contents
Strategic report
02 Chairman’s statement
06 Chief Executive Officer’s review
10 Finance Director’s review
14 Our vision
16 Our strategy
20 Opportunities for growth
22 What we do - operating environment
24 What we do - our services
28 What we do - where we do it
30 Our governance structure
32 Internal controls and risk management
35 What did we achieve?
54 Key performance indicators
Directors’ report
58 The Board
59 Shareholder information
and company advisors
60 Corporate governance report
65 Audit Committee report
67 Nominations Committee report
68 Remuneration Committee report
80 Other disclosures
82 Directors’ responsibilities statement
Financial statements
83 Independent auditors’ report
90 Consolidated income statement
90 Consolidated statement
of comprehensive income
91 Consolidated statement
of financial position
92 Company statement of financial position
93 Consolidated statement of cash flows
93 Company statement of cash flows
94 Consolidated statement
of changes in equity
95 Company statement of changes in equity
96 Notes to the financial statements
Additional information
144 Address book
TCK-COVER-X-REPRO_TC 27/03/2015 20:41 Page 1
TClarke plc
45 Moorfields
London EC2Y 9AE
020 7997 7400
www.tclarke.co.uk
Building innovation
Building relationships
Building services
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