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Annual Report and
Financial Statements
2017
Focused on
the future
Who we are and what we do
TClarke designs, installs, integrates
and maintains the full range of
mechanical and electrical services
and the digital infrastructure to
create a 21st-century building.
Across the country, our directly employed
teams lead the industry for quality and safety.
Our focus is on being the partner of choice in
every market sector in which we work.
Contents
04
42
84
Strategic report
Governance
Financial statements
04 Chairman’s statement
42 Board of Directors
84 Consolidated income statement
06 Chief Executive’s report
46 Corporate Governance report
11 Strategic overview
47 Statement of compliance
26 Corporate social responsibility
51 Audit Committee report
32 Principal risks
55 Nomination Committee report
36 Long-term viability statement
56 Directors’ remuneration report
85 Consolidated statement of
comprehensive income
86 Consolidated statement of
financial position
87 Company statement of
financial position
38 Group financial review
72 Directors’ report
88 Consolidated statement of cash flows
75 Statement of Directors’ responsibilities
89 Company statement of cash flows
in respect of the financial statements
76
Independent auditors’ report
90 Consolidated statement of
changes in equity
91 Company statement of changes
in equity
92 Notes to the financial statements
£6.5m
£6.2m
2.3%
2.5%
£337m
£330m
3.5p
3.2p
Financial highlights
Revenue1
Percentage change
2016>2017
+12%
Profit before tax1
Percentage change
2016>2017
+92%
Net cash
Percentage change
2016>2017
+26%
2017
2016
2017
2016
2017
2016
01
Underlying profit before tax1
£311.2m
£278.6m
Percentage change
2016>2017
+5%
2017
2016
Underlying operating margin1
£3.7m
£7.1m
Percentage change
2016>2017
-8%
Forward order book
£11.7m
£9.3m
Percentage change
2016>2017
+2%
2017
2016
2017
2016
2017
2016
Basic earnings per share
Change
2016>2017
+7.99p
2017
2016
5.45p
Dividend per share
13.44p
Percentage change
2016>2017
+9%
1 From continuing operations.
For further information see Group financial review on pages 38 to 41.
Investment case
1
Cash
2
3
4
5
6
Management
Discipline &
Strong Risk
Control
Environment
Financial
Strength
Forward
Revenue
Visibility
Balanced
Business
Improving
Margin Profile
& Profitability
> The Group’s cash
> Targeted approach
generation remains
robust with the
year end net cash
improving by 26%
to £11.7 million, the
strongest closing
balance recorded
since 2009.
to contract
tendering process
and assessment
and strength of
potential customers.
> Prudent profit
recognition.
> 66% of forecast
2018 revenues
booked as at 31st
December 2017.
> £100 million of
revenues booked
for 2019 and
beyond.
> Substantial and
growing cash
balances.
> Planned investment
for future growth
funded entirely
from internal
resources.
> Commitment to
progressive
dividend policy.
> Increasing exposure
to long-term
infrastructure work.
> Focus on growing
profits ahead of
revenues.
> Investing in new
technologies and
secular growth
markets.
> Differentiated
service offering
commands higher
margins.
> Five Target Markets
– M&E Contracting,
Residential &
Accommodation,
Technologies, FM
& Frameworks and
Infrastructure.
> Medium-term target
to increase the
underlying operating
margin to 3%.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017
02
At a glance
TClarke is a market-leading, nationwide
building services contractor with a complete
and complementary set of services
Our five target markets
Our clients and end users
Infrastructure
> Rail
> Airports
> Hospitals
> Education
> Prisons
> Healthcare
> Defence
Residential & Accommodation
> New build
> Refurbishment
> Hotels
> Student Accommodation
Facilities Management
& Frameworks
> Planned and Reactive Maintenance
> On Site Facilities Management
> Long Term Frameworks
> Term Contracts
Technologies
> Data Centres
> IT Infrastructure and Networks
> Audio Visual
> Fire and Security
> Smart Buildings
> Manufacturing and Prefabrication
M&E Contracting
> Commercial Offices
> Retail
> Leisure and Stadiums
> Museums and Galleries
> Design and Build
TClarke has deep, long-term partnerships both with major
principal contractors and with property owners and developers.
Below is a selection of top clients based on 2017 revenue spend.
Lend Lease
Construction
Multiplex
Stanhope Plc
Overbury Plc
Canary Wharf
Contractors
Bowmer & Kirkland
Structuretone
Sir Robert McAlpine
Westfield Europe
BAE Systems
Kier
St George
Vinci Construction
John Lewis Partnership
Willmott Dixon
Dragados
What we do
Through the full building lifecycle
Design
Design systems
and value engineer
them.
Procure
Add value and
increase buildability
through expert
procurement.
Install
In-house teams to
install the building
services on projects
of every scale
across the UK.
Maintain
In-house teams
to provide
maintenance
services across
the UK.
TClarke Annual Report and Financial Statements 2017 03
Scotland
£23.0m
Regional revenue split
North
£48.0m
Our organisation
We provide complete UK coverage, matching the needs of our
client base with 17 offices organised in four regions.
London and South East
£177.6m
£62.6m
£48.0m
£23.0m
North
Scotland
Central and
South West
Total revenue
£311.2m
Central and South West
£62.6m
London and
South East
£177.6m
New standard of building intelligence
Bringing the building to life
Security access
Manage my security
access.
Facial/retina
recognition
Recognise me.
Access services
and my data
My computer,
my data, my locker,
my services.
Find my team
location
Identify my team’s
location and my
place, too.
Power
Distributed and
controlled.
Services
Heating, lighting,
ventilation, water,
waste and their
networks and
controls.
Data
Highly resilient and
secure data networks.
Alarm and security
Alarm, security
and safety systems
integrated and
controlled.
Systems and
internet
Integration of
management systems
and IP addressable
components and
the delivery of data
and control within
advanced graphic
user interfaces.
What we do
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017
04
Chairman’s statement
Iain McCusker
Chairman
Another year of improved
profitability and operating
performance for TClarke
Whilst 2017 has been challenging for our
sector, I am pleased to report that it has been
another year of improved profitability and
operating performance for TClarke. The cash
position continues to strengthen (26% increase
year on year after major strategic investment)
and the Group is debt free on a net basis.
Our current and forward order book – in
terms of both value and project quality – is
evidence of the continuing confidence of our
clients, and the market, in general in our
performance, strength, strategic positioning,
quality of service and ability to deliver.
The Group continues to focus on its strategic
development to ensure that it retains its
market-leading position and continues to
meet, and enjoy the benefits of meeting,
the growing and changing demands and
expectations of our clients. At the same
time, TClarke retains its focus on operational
performance and profitable growth.
Our ‘You See, You Say’ safety programme
is recognised as an industry leader. This is
a matter of pride, since it stems directly from
the safety mindset shown by our people and
the hard work of our dedicated safety team,
day by day across the UK, with significant
ongoing improvement in our outstanding
safety record. We will never be complacent
as far as health and safety is concerned and
will always look to drive forward the
boundaries in health and safety achievement.
Strong headline performance
I am pleased to report another year of
strong performance by the Group, meeting
market expectations.
We continue to be seen as the supplier of
choice to major, business critical projects for
multi-national companies. During the year,
our forward order book hit record levels and
at the end of the year stood at £337 million.
Turnover in the year increased by 12% to
£311 million and underlying profit before tax
grew by 5% to £6.5 million. Underlying EPS
increased to 12.37p (2016: 11.6p).
TClarke Annual Report and Financial Statements 2017 05
and further details of this are found on
page 16.
Board changes
I was pleased to welcome Peter Maskell to
the Board in January 2018 as a Non-Executive
Director. Peter’s experience in the digital
transformation of Philips will be particularly
helpful to us as we continue our strategic
development.
In February 2018, Martin Walton, Finance
Director, left the business and Trevor Mitchell
was appointed Finance Director, effective
1st February 2018, for an interim term of one
year. The Board would like to thank Martin for
his substantial contribution to the Group since
he joined the business in 2007 and wish him
well for the future.
Outlook
2017 was another very good year for TClarke.
Our current and forward order book is fully
replenished with high-quality projects, many
of which are business critical for our clients.
The strength of our order book is evidence
of our significant market share and we
are maintaining our discipline and focus
to deliver sustained margin improvement
across all our regions. The Board is confident
that the Group is well placed to meet profit
expectations for the year ahead and our
commitment to sustained performance
growth is such that the Board has set
a medium-term target to increase the
underlying operating margin to 3%.
I would like to conclude by expressing
my thanks to all of our stakeholders for
their continued support and to all TClarke
staff across the UK for their work and
commitment, which has allowed us to
deliver for our clients and further build
our business and brand.
Iain McCusker
Chairman
27th March 2018
Continued focus on cost discipline
and cash management
Our performance and results have benefited
from our ongoing focus on cost discipline
and cash management. This reflects our
ever strengthening disciplines in the internal
management and delivery of projects,
together with our focused client and partner
management approach, and is a result of
our project management and delivery skills
across the Group in all regions.
Average cash balances throughout the year
continued to improve. The net cash balance
at the end of 2017 was £11.7 million. This
has been achieved after the initial cash
consideration of £1.5 million in the acquisition
of Eton Associates and £1.0 million in our
enhanced manufacturing capabilities, based
in our new facility at Stansted.
Dividend
The Board is committed to a progressive
dividend policy, improving returns to
shareholders and delivering a sustainable
increase in dividend over the longer term.
The Board is therefore pleased to recommend
a final dividend for the year ended 31st
December 2017 of 2.9 pence per share,
making a total of 3.5 pence for the year
(a 9% increase on 2016), reflecting the
Group’s performance and our confidence in
the business going forward, whilst balancing
the rewards to shareholders with the interests
of other stakeholders.
Strategic focus and direction
The programme of strategic initiatives we
have implemented to reshape and refocus
the business to align with value creation,
delivery and growth are bringing financial
returns. We recognise, however, that we
cannot stand still. Our world and markets
are constantly changing. Technology, client
demands and the requirements of the digital
world are constantly evolving and this
presents significant opportunity for us.
As we continue to grow and develop our
core markets and offerings, we are at the
same time looking to further develop our
specialisms and integrated offerings to ensure
we can deliver value-creating solutions to our
clients and partners. Our acquisition of Eton
Associates during the year was an important
and visible step in this strategic programme
Dividend per share
3.5p
2016: 3.2p
Percentage change: 2016 > 2017
+9%
Peter Maskell, former Managing
Director of Philips UK, joined
as a Non-Executive Director.
He has significant experience
in the successful digital
transformation of the Phlips’
brand and business model
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017
06
Chief Executive’s report
Mark Lawrence
Group Chief Executive Officer
In 2017, we also made major
steps forward with our partners
by working on and winning
landmark projects which drive
innovation, sharpen the skills of
our people and build expertise
and commercial advantage
A focus on the future is the recurring
theme evident across our business in 2017;
investments in people, in new skills and
expertise, in new operations and geographic
locations and in enhancing our core skills
and specialisms.
These are all aspects of our clearly stated
business strategy in action. In 2017, we have
continued to build our Company to ensure
that we are 100% fit to retain our market-
leading position as we move into a future
which is full of opportunity.
Enhancing our core business
In 2017, the construction industry reaffirmed
the value it places on our core proposition of
M&E contracting services, by awarding us
contracts to fill a record order book. In 2017,
we also made major steps forward with our
partners by working on and winning landmark
projects which drive innovation, sharpen the
skills of our people and build expertise and
commercial advantage.
When I was appointed Chief Executive
Officer in 2010, TClarke’s core business
centred on electrical contracting for major
projects in London. In the following years
we have expanded our core skillset to
include mechanical contracting, and in 2017
the order book evidenced this successful
progression. In 2017, our core skillset has
expanded further still. Our highly successful
TClarke Intelligent Buildings team has been
complemented by the additional scale and
capability of Eton Associates. This allows us
to provide a comprehensive digital, data and
controls operation, alongside mechanical and
electrical services.
This core expansion has been market driven
and the market itself is driven by macro-
economic trends, including ‘big data’ and digital,
which are transforming end user demand in
many ways. We are acknowledged across our
peer group as a leader in the engineering skills
that enable the vision, design, the planning and
the theoretical engineering to develop strong,
safe, resilient, environmentally positive cities,
buildings and infrastructure. By contributing
in this way, TClarke will continue to have a
significant role to play in building Britain’s
future. A recent example was in December
when our South West team was awarded the
first M&E Package for Dyson’s prestigious new
global technology campus in Wiltshire.
TClarke Annual Report and Financial Statements 2017 07
Building our specialisms and sectors
In 2017, we have had considerable success
across our markets. Our Transport team’s
selection by Manchester Airport Group brings
us a major airport contract, our Design
and Build team continues its excellent
performance and growth trajectory, our
Mission Critical team’s work on data centres
and the complex Selfridges project has been
highly valued and our TClarke Intelligent
Buildings team has won major data, fire and
alarm projects. Manufacturing has had its
most successful year ever, with the opening
of our multi-skilled, purpose-designed
operation at Stansted, and Healthcare
continues with its world-class partnerships,
winning projects under the NHS’s new P22
framework agreements. Our Residential
business again won a series of awards and
expanded its footprint and our successful
in-house specialist FM business has also
won new partnerships.
It is also important to note that we have
been extremely successful in winning and
delivering research and laboratory projects
across every region of our business. Once
again, this shows how our business can
adapt as demand and opportunity shifts
in the marketplace.
Going forward, we are reorganising our go-to
market strategy with five new market offerings:
Infrastructure, M&E Contracting, Residential &
Accommodation, Technologies and FM &
Frameworks. This will give us an improved
focus on growth and a better prospect of
valuable metrics going forward – both for the
business and our shareholders to see and
measure progress.
Deepening our partnerships
TClarke is not unusual in talking about
partnership as being key to success, but
2017 shone a light on the range and variety
of those relationships and their value to us.
Michael Bloomberg in London followed the
actions of the local teams at David Wilson
Homes in Glasgow, Rolls-Royce’s team in the
North East and the engineering team at the
Royal Cornwall Hospital – they all took the
time to commend our people and their work.
These testimonials and commendations are of
direct value to our shareholders because they
signal the continued and growing preference for
our brand. Brand reputation and the expressed
demand and encouragement from our clients
in 2017 has led us to open new offices in
Portishead, Birmingham and Dumfries, and
immediately won major new projects in
geographic areas that were new to us.
TClarke’s mechanical and
electrical package wins for
the two towers at Southbank
Place includes our largest
mechanical package yet
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 08
Chief Executive’s report continued
Regional highlights
Major projects and progress across
our four regions
Scotland
North
Mitsubishi Air Con Systems Europe
Rolls-Royce Fleet Support Facility
2017 was TClarke Scotland’s most successful year to date,
with revenue, profit and operating margins all at a record
high. Our Residential team achieved further growth, delivering
2,325 units and winning six Seal of Excellence and 12 Pride in
the Job commendations at the NHBC Awards. This growth was
largely driven by the nationwide commitment to address the
ongoing housing shortage.
Our Engineering team delivered numerous projects, including
the fabrication of bespoke alignment and fixing templates for
20km of electricity pylons for Morgan Sindall. Our Intelligent
Buildings Team was active on landmark installations, including
22 Bishopsgate and it also began collaboration with the
Group’s new Eton Associates team, at Canary Wharf Estates’
One Bank Street development. Scotland’s M&E team had a
strong year, delivering projects for Mitsubishi and Heart of
Midlothian FC. The M&E Team also had success with major
projects in the education and renewable energy sectors.
The Scotland team recruited 16 new apprentices in 2017, and
as well as marking the continued progress of previous and
current Apprentice of the Year finalists within the business,
we also saw the introduction of an Apprentices’ Steering
Committee in Scotland to strengthen the voice of the next
generation within our operation.
The 2017 results for the Northern region were in line with
expectations and previous forecasts. Revenue was slightly
reduced, but the operating profit was maintained.
During 2017 a number of prestigious projects were completed
across the Northern region. Newcastle delivered their third
project for the University of Sunderland, a new teaching
facility for nursing, and also delivered a new facility for
Rolls-Royce in Washington. Leeds continued the relationships
with Bowmer & Kirkland on the ETA framework for schools
and also with ISG on various projects including prisons and
schools. A new three-year framework agreement with BAE
was secured by the North West office, a significant success
for the team alongside being appointed to the MAG framework
as part of the Group submission.
FM remains an integral part of the business in the North,
with Leeds at the forefront. The model has been proven and
is currently being rolled out at the Newcastle office, with the
expectation that the North West will follow once Newcastle
is fully established.
TClarke Annual Report and Financial Statements 2017 09
Central and South West
London and South East
The Box, Plymouth
Victoria Underground Station upgrade
We identified challenges in the South West region early in 2017
and steps were taken to target better quality projects and in
particular, projects that will run to completion beyond feasibility
stages. By December 2017 the effect of this work was that the
South West had secured all of its targeted revenue for 2018,
with it’s strongest ever order book. We now expect the South
West to perform in line with the rest of the Group.
2017 was another strong year for London and the South East,
with revenue showing continued strength, both in the current
year and looking ahead. 2017 saw continued high levels of
good quality tender opportunities, and we were able to expand
our core client base and entered into direct negotiation on
a number of key projects, rather than being exposed to a
competitive tender.
Elsewhere in the region our Derby team showed continued
strength, particularly in residential and accommodation
projects while our Peterborough office showed strength
in Medical, Retail and the Lab and Research market
of Cambridge.
We also opened our new office in Birmingham – initially to
support our growing FM client portfolio, but subsequently
with the strategy to target further opportunities across our
chosen sectors.
Revenues were driven by the ongoing success of our core
M&E operation. Successful delivery of major M&E projects,
such as Bloomberg Place and Rathbone Square, were
matched by the smooth transition of project teams onto new
landmark projects such as 22 Bishopsgate and Building S9
at IQL Stratford.
The ongoing establishment of our mechanical offer on a
par with our electrical offer continued successfully and was
marked by the award of projects, including our largest ever
mechanical package at Southbank Place.
During 2017, the London and South East business welcomed
Eton Associates into the Group and also successfully opened
the new Stansted manufacturing facility, capping a highly
successful year of significant investment in our future.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 10
Chief Executive’s report continued
Accident rate
-17%
percentage change 2016>2017
We saw previous winners and finalists of our
Apprentice of the Year award growing into
leadership roles. All of these achievements
have given me a considerable sense of pride
and satisfaction in what we are building at
TClarke.
A record year for safety
In concluding, I want to spotlight our safety
record in 2017. We have an absolute accident
reporting regime, in which every accident,
however small, was recorded, we also
achieved an 17% reduction in the annual
accident rate, against the backdrop of a
record order book. This didn’t happen by
accident! It has been the result of constant
vigilance and focus across our business and
the work of our dedicated nationwide safety
operation. This work sits at the heart of the
TClarke Way.
Mark Lawrence
Group Chief Executive Officer
27th March 2018
The ongoing success of targeted
tendering
2017’s order book was a record one for scale
– but more importantly for quality. We can
define quality broadly as meaning the kind
of projects where clients value our services
appropriately and where our people want to be
engaged upon because they are professionally
rewarding. Targeted tendering continued to
prove successful for TClarke in 2017 as we
have consciously matched our skills and
resource to quality opportunities, with the
purpose of delivering value.
Sustaining our key advantage –
our people
As I have travelled around our business
and projects this year, my strongest single
impression has been of a pride in our people
– many of whom have built their whole
careers with us and some of whom are just
starting out. The relative scale and quality
of our new apprentice intake massively
exceeds the best industry targets.
In 2017, our Training Academy was launched.
It is focused on developing the best career
paths for our people and has senior level
commitment within TClarke and will be a
key feature of our business going forward.
In 2017, we saw TClarke people achieving
degrees and professional qualifications,
winning awards and moving into new
disciplines within our business.
We have an absolute accident reporting
regime, in which every accident, however
small, was recorded, we also achieved an
17% reduction in the annual accident rate,
against the backdrop of a record order book
TClarke Annual Report and Financial Statements 2017 11
Our strategic priorities
Objective
How it will be achieved
What we did in 2017
Enhance our core
business
> Continue to deliver high profile,
> Successfully delivered a series of
challenging projects to retain reputation
as market leader
> Continue steady expansion of historical
‘electrical’ contracting leadership into
mechanical and ICT areas
> Target and win appropriate new projects
to build order book quality
landmark projects in London
> Successfully delivered and won an
increasing number of major mechanical
and electrical projects in London
> Successfully and substantially expanded
our in-house ICT capabilities in London
and began its integration
Sustain our ‘people’
advantage
> Further develop our skills base to
> Successfully introduced the TClarke
anticipate market need
Training Academy to develop career paths
> Enhance our market leadership in
> Successfully launched the five-year
apprenticeship and career path training
> Develop strong succession planning for
leadership roles at every level
Advance our
partnerships
> Understand and anticipate market need
for collaborative contracting
> Mirror major principal contractors
leadership programme to develop young
leaders nationwide
> Continued to lead the market in
apprenticeships and training
> Won a series of client recommendations,
awards and testimonials nationwide
for partnership approach
Enhance our
capabilities
to exploit specialist
markets
Adopt targeted
tendering approach
nationwide and deepen key relationships
> Won further projects with existing
> Deliver quality experience throughout
our service
> Maximise our operational agility so
we can exploit opportunities quickly
> Enter specialist markets with a
proposition that is of appropriate quality
for our brand
> Deliver high quality experience and
service in each market in which
we operate
key partners
> Established a series of new key
partnership relationships in new
sectors and in new geographies
> Achieved significant expansion of
capabilities in Intelligent Buildings
and Manufacture
> Secured breakthrough aviation project
for Transport division
> Delivered significant value across
all specialisms
> Maximise the value of our in-house
> All regions effective and disciplined
resources through effective organisation
> Increase effectiveness in identifying and
in adhering strictly to targeted
tendering approach
winning appropriate tenders
> Significant combination of resources and
> Retain discipline in adhering to targeted
tendering approach
cross selling across regions
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 12
Our marketplace
Buoyant demand and growing digital
transformation driving opportunity
despite Brexit uncertainties
Market confidence
Markets for TClarke services in 2017 were
buoyant. Despite uncertainties around
Brexit and reported uncertainties across
construction, major end users and developers
chose to make fresh and substantial
investments in major projects and the
demand for TClarke’s teams and services
remained high. In 2017, many of our major
project teams moved on seamlessly and
directly from one successful completion to
a new major project, often with the same
long-term partner. This fact underlined the
ongoing market confidence in TClarke.
The effects of underlying and long-term
macro trends were felt with increasing
strength in 2017 as ‘digital’ landed in our
sector. Advances in all kinds of digital
technology and design capability, allied to the
exponential increase in power and decrease
in cost of those technologies, are presenting
designers and developers with opportunities
to transform all aspects of a building’s
efficiency, performance and responsiveness
to end user needs as they change.
Market demand for TClarke’s expertise and
integrated suite of core services has reflected
this steadily increased complexity.
Brexit has created uncertainties,
but the macro effects of
globalisation, particularly the
gravitation of organisations and
business ecosystems to the most
attractive hub cities in the world,
is also having a powerful effect
Market opportunities
TClarke expanded its core offer in 2017 as
we have continued to build our reputation
and track record of delivering large-scale
mechanical, electrical and ICT projects.
This has substantially increased the range
and scope of opportunities available to us.
Brexit has created uncertainties, but the
macro effects of globalisation, particularly
the gravitation of organisations and business
ecosystems to the most attractive hub cities
in the world, is also having a powerful effect.
This has clearly had a beneficial effect for
TClarke in London, but it has also helped
us to build significant market share in places
such as Cambridge, where our track record
of laboratory, research and education projects
is outstanding.
Partnership is a key feature of our business
approach nationwide. In 2017, with the support
of long-term clients and partners, we opened
offices in new geographic locations (Dumfries,
Portishead and Birmingham) and were
immediately rewarded with significant contracts.
TClarke’s response is agile – as reflected by
these openings in 2017. Our brand reputation
is built on high quality delivery from our
in-house teams. This is something we
safeguard at all times. When TClarke enters
a new geographic market, it offers the full
TClarke experience and brand promise.
Sectors and specialisms
2017 saw ongoing opportunity across our
current sectors and specialisms.
In addition, we have seen continued
opportunity for our business in the design
and construction of laboratory and research
facilities as well as in schools and education.
Like all of our other specialisms and sectors,
these are areas in which additional value is
placed on the quality, depth of technical
expertise and capability to deliver which
TClarke offers.
TClarke Annual Report and Financial Statements 2017 13
Bloomberg London, another world-
class project in the City of London,
working with Sir Robert McAlpine
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 14
Business model
Focused on maximising our agility in targeting
high-quality services at the right market
opportunities to deliver value for stakeholders
and further build our brand reputation
Our competitive
advantage
What we do
People
We employ highly qualified and
experienced professional engineering
staff and operatives and run an extensive,
industry-leading apprenticeship scheme,
which provides a source of high-quality
new recruits.
Partnerships
We focus on building long-term
partnerships nationwide with principal
contractors and clients, enabling us to
collaborate on key projects.
Nationwide coverage
We cover the whole of mainland UK
with 17 offices organised in four regional
operations that mirror our clients’
organisation and serve their needs
effectively.
Technology
We are a high-technology business
and leaders in the delivery of complex
installations and new technologies. We
are investing to ensure we remain at the
forefront of technological advances.
Reputation
As a market leader, we have built a
reputation for delivery and quality.
Design
Procure
We design and value engineer
systems, drawing on our
innovative approach and
technological expertise to provide
intelligent building solutions.
We add value through expert
procurement of the necessary
materials, services and expertise
across the life of a project.
How we do it
The TClarke Way
1
2
3
Safety
Safety is our number
one daily priority
Quality
High-quality work
that’s right first time
Innovation
Expert in buildability
and integrated
thinking
TClarke Annual Report and Financial Statements 2017 15
The value we create
for our stakeholders
For shareholders
The ability to identify and take
opportunities to grow the business and
deliver progressive returns.
For customers
Total reliability in project delivery, quality
and safety alongside high technical skills.
For employees
Industry-leading career paths within a
world-class organisation and project work
to take pride in.
For partners
A collaborative and open approach to work
which maximises value, efficiency and
productivity.
For society
The high-quality built environment,
high-quality engineering jobs and highly
responsible approaches we all want.
What we do
Install
Maintain
We employ highly qualified and
experienced in-house engineering
teams of professionals and
operatives to install and deliver
our solutions and services.
Our in-house teams provide a suite
of specialist mechanical, electrical
and ICT maintenance services to
support the ongoing functioning of
a building throughout its lifecycle,
across the UK.
Delivers value for all our stakeholders
4
5
6
Value
Delivering against
innovative end-user
focused contracts
People
Directly employed,
high-quality building
services personnel
Relationships
Taking responsibility
at every level for
collaboration
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 16
Strategy in action
Enhancing our
core business
TClarke’s core offer expanded in 2017
The long-term strategy of expanding our
core so that our brand is known for
electrical, mechanical and digital services,
increases the scale and range of work
packages we can bid for. 2017’s project
wins consisted of a significantly wider
range of electrical, mechanical, M&E and
digital packages than any year to date.
An industry leader in ICT
The acquisition of Eton fits
this strategy of core
expansion. Eton integrates,
installs and manufactures
building controls systems;
they also maintain them
through their lifecycle. Eton
is well regarded in the
construction industry in
London and the South East,
for major projects including
1 Canada Square, Bloomberg
London, 20 Fenchurch Street
(the ‘Walkie Talkie’) and HM
Treasury. 60% of the Canary
Wharf Estate uses Eton
controls and the business has
85 employees who in 2017
relocated to join their TClarke
colleagues at our London
Head Office and Stansted
manufacturing centre.
10 Fenchurch Avenue
In 2017, within months of acquiring Eton,
we saw TClarke Intelligent Buildings (TCIB)
teams and Eton teams collaborating on
22 Bishopsgate, at the Bank Street
development at Canary Wharf and also at the
first residential block that is going up there.
TCIB are designing the data networks and Eton
will be installing them. So, as the long heralded
‘intelligent buildings revolution’ becomes a
reality, TClarke Group has market-leading
in-house capability and expertise.
Significant continuity with major partners
A key theme of 2017 has been continuity
with major partners. TClarke teams in
London have moved seamlessly on with
their counterparts to the next major project,
having successfully delivered previous
projects. This continuity and success is
reward for excellence in delivery and key
to driving strong utilisation of our resource
and value to our stakeholders.
The previously identified potential for
managed growth has been realised in 2017,
as we have won a further series of landmark
projects and a range of electrical, mechanical,
M&E and ICT packages at projects including
Southbank Place, One Nine Elms and 7-10
Hanover Square. This success, working across
an increased range of principal contractor
partners, has driven our record order book.
TClarke Annual Report and Financial Statements 2017 Project profile
22
Bishopsgate
This project re-defines building
intelligence and delivers a workplace
over 61 storeys incorporating 51 office
floors and with extensive facilities
such as restaurant, viewing gallery,
business hosting and event spaces,
health and wellness centre gym,
communal dining and open kitchens.
Building
Management
system
The BMS project features
40 large control panels, 100
small control panels, 3,000
fan coil units, state of the art
controllers and the latest Niagra
NX BMS graphics package.
Electrical Shell & Core
The infrastucture installation
is one of the largest in Europe
comprising 2x 33kV transformers,
2x 33kV switchboards, 4x 11kV
switchboards, 14 LV transformers
and switchboards, 44 secondary
switchboards and 600 distribution
boards. There are also
6x 2MVA generators.
1717
Security system
The Security system includes
Access Control, CCTV and Facial
Recognition System for the base
build areas.
The Mechanical CAT A
The Cat A mechanical fit out is also
on a mammoth scale, featuring
3,000 fan coil units and 12,500
grilles.
Enough pipework (163,000m) to
reach from our London HQ to our
Birmingham office and back.
The Electrical CAT A
The electrical Cat A fit out
features 12,500 state of the art,
energy saving light fittings.
Fire Alarm system
The towers fire alarm system
comprises 81 panels, 7,000 fire
alarm devices and 12,200 speaker
units.
Data network
We are delivering a complete
digital solution converging
building services onto a single
network platform. Services
include building management,
security, WiFi, lighting control,
blind control, fire detection,
AV and Satellite Integrated
Reception System (IRS).
Enough data cables (42,000m)
to cover the length for the
London marathon.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 18
Strategy in action
Specialist markets
2017 saw success and growth in specialist markets
TClarke is active in identifying and entering
those specialist markets and sectors where
higher-value skills are required and rewarded.
These areas offer us the potential to
balance our order book and actively
manage our exposure to the risk of cyclical
or long-term trends in one or other sector.
Infrastructure
Residential &
Accommodation
Facilities
Management
& Frameworks
Technologies
M&E Contracting
Our approach is active and pragmatic
– it delivers reliable returns
There are two principles we adopt when
managing our approach to specialist markets.
The first is to remain agile and alert to
opportunity and changing patterns of market
demand. The second is that when we do
choose to enter a market, we do it ‘the
TClarke Way’.
The TClarke Way features our own in-house
resources – because that allows us to deliver
the quality our clients and our brand
demands, it is also steady and practical –
so we do not over-reach ourselves or
compromise in any way. The TClarke Way
means safety, quality and a partnership
approach.
2017 was successful for our Healthcare,
Design & Build, FM, Transport, Mission
Critical and Residential teams. In each of
those areas, major projects were delivered
successfully and significant new projects
and relationships were developed.
Going forward, we have decided to improve
our go-to-market offering by moving from
nine specialisms to five clear market
offerings: Infrastructure, M&E Contracting,
Residential & Accommodation, Technologies
and FM & Frameworks. This gives us a clearer
proposition for our marketplaces and an
improved focus on growth. It also offers a
better prospect of valuable metrics going
forward – both for the business and for our
shareholders to see and to measure progress.
TClarke Annual Report and Financial Statements 2017 19
Project profile
Stansted
Manufacturing
Facility
Offsite manufacture improves safety,
quality, efficiency and working
conditions. This facility has delivered
strategic advantage and value for
TClarke from the moment it opened.
Delivering direct
value to our clients’
projects from day
one
Stansted has led directly to
better production times. We
have serviced many of our
internal contracts including IQL
6, South Bank Place and 22
Bishopsgate, driving substantial
revenue in year one.
Specialist BMS
and healthcare
manufacturing
teams
Integration of Eton Associates
and TClarke Healthcare bringing
together a wealth of expertise in
the field of panel manufacturing.
Additional new
revenue streams
in year one
To maximise the value of this
asset, we have entered into
several framework agreements
with leading suppliers.
Enhanced in-house
design capabilities
The immediate success of
the Stansted facility led us in
2017 to expand our in-house
CAD and Design team for
manufacture capability.
State of the art
welding technology
Among other new technology
investments, TClarke has
invested in ten Fronius MIG/
MAG machines.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 20
Strategy in action
Advance our
partnerships
Non-confrontational partnership contracting is a way of life for TClarke
Construction projects traditionally have the
potential for confrontational and ‘contractual’
relationships. TClarke has a deep belief
in partnership, can-do approaches and
collaboration. That belief is tangible onsite
in the attitudes of our people and it drives
value by growing the reputation of our
brand. In 2017, TClarke’s performance and
success has been defined by partnership
in every region.
TClarke Scotland’s ‘Contractor of the Year’ award from Barratt Homes West was one of
many such partner awards achieved by our people
Our partnership approach delivered
direct value to our clients in 2017
Developers and main contractors prize
sustained partnership through the life of a
project, because, without it, complex projects
can be stopped or delayed whenever conflicts
of needs or challenges emerge, with many
specialist teams working alongside each
other. In 2017, TClarke was commended for
our partnership approach by principal
contractors across the UK.
Our partnership approach delivered
direct value to our shareholders in 2017
In 2017, BAE again chose to select TClarke
to provide advanced FM services across its
manufacturing operation. Great Portland
Estates chose us again following our
successful collaboration at Rathbone Place,
and John Lewis chose us again for a range
of projects including the flagship store at
Westfield London. These are just highlights.
Our client list in 2017 is loaded with
partnerships stretching back five, ten
and 20 years, nationwide.
Partnership works at Board
and site level
TClarke can talk partnership and mean it
because we feature in-house teams. Our
people are ‘our people’. They care about the
brand and take pride in it. We are a ‘family’
firm in that sense. This personal commitment
means that, at every level, our people are
motivated to deliver and support our clients.
In 2017, our people won numerous awards
from clients that recognised this truth.
TClarke Annual Report and Financial Statements 2017 TClarke Annual Report and Financial Statements 2017
21
Project profile
Schools with
Bowmer & Kirkland
Since mid 2015, TClarke’s Leeds
team has delivered 13 schools
projects and is currently involved in
five more (with more in the pipeline),
working with Bowmer & Kirkland.
In that time, this has developed
into one of our most valued
strategic relationships.
Pride and
commitment
Perhaps most importantly, our
people are committed to doing
what’s needed to deliver –
sometimes operating alongside
the needs of a working school.
We share Bowmer & Kirkland’s
commitment to the client.
Adding value
Although our team is highly
experienced, they aim to learn
and get better, bringing in new
best practices and learning
from others’ experience. We
operate to the ISO 9001 quality
standard and have the structure
in place to react very quickly at
management or site level.
Full design and
build M&E services
We provide a full mechanical
and electrical design and
build service, including M&E
design, working to BIM Level 2,
pipework services, public health
services, ventilation services,
Building Management services,
thermal insulation services,
small power and lighting, data
services, lightning protection,
fire alarm and access control
including CCTV.
Safety first
Our effectiveness in
implementing TClarke’s ‘You
See, You Say’, safety reporting
process on these projects has
also been noted by Bowmer
& Kirkland. It is another
sign of the commitment to
consistent high standards and
focus on improvement in this
partnership.
GovernanceFinancial statementsStrategic report 22
Strategy in action
Targeted
tendering
Our teams show discipline in selecting and winning the right opportunities
Throughout 2017, targeted tendering has
been a well-understood and well-executed
strategic priority across the Group. This
involves a selective approach to new work,
bidding only for projects which fit our
capabilities and criteria for value return.
Being selective, we are also able to focus
our in-house resources more effectively
and achieve a higher win ratio.
Dyson Global Tech Campus
Our growing success in research and
laboratories nationwide in 2017
In 2017, we were winning and delivering
major research, educational and laboratory
facilities across all four regions. There
has been a systemic increase in the long
term, and ongoing demand within the UK
economy for these facilities, as educational
establishments seek to set up facilities in
which to incubate start ups and as Britain’s
biotech, healthcare, life sciences and
advanced manufacturing industries all
continue to grow.
These projects require higher levels of skill
and quality, and in return they offer better
returns – so the fit for TClarke is a good one.
During 2017, our Scotland team delivered
the Roslin Innovation Centre at Edinburgh
University’s vast Easter Bush campus. Our
Central and South West team won the Dyson
Global Tech Campus project, delivered a
successful project completion at Derriford
Research Facility and had several ongoing
projects at Cambridge. In the North, we
delivered a new Nursing Teaching Facility
for the University of Sunderland.
Targeted tendering in the research and
laboratory sector has built us a set of skills,
relationships and experience which, as with
our decades of experience in the Cambridge
market, we believe we can build on to create
steady growth opportunities nationwide.
TClarke Annual Report and Financial Statements 2017 23
Project profile
Illumina and
Cambridge science
Over 16,000m2 of laboratory and offices
and meeting space including 45 separate
laboratories.
These state-of-the-art laboratory
buildings at Granta Park will serve as
the new European headquarters for
Illumina, who are world leaders in
genomics focused on improving
human health. For TClarke, this is the
latest in a long line of world-class
science facilities in Cambridge.
HV/LV
Infrastructure
Complete HV and LV Installation
including N+1 Transformer
arrangement and multiple LV
Generator solution to provide
resilient supplies to the
Laboratory Essential Supplies
associated Data Centres and
Emergency systems.
Intelligent Lighting
Controls
Fully Intelligent Lighting DALI
Lighting control system with
Head End Graphics package
providing individual control
of all Light fittings within
the building.
Structured Cabling
System
Cat6 Structured Cabling System
providing hard wired solution
and WiFi Capability to the
internal and external areas
of the building.
Security Systems
Full Access Control,
CCTV and Intruder Alarm
Systems interlinked with
Illumina’s Global Security
Systems.
TClarke and Cambridge science
Back in the 1990’s, we worked on The Wellcome Trust Sangar Institute (which houses
laboratories for genome research) on the ARM building in Cambridge and on the Centre
for Mathematical Sciences (previously working home to Professor Stephen Hawking). In
the 2000s, we delivered laboratory spaces including Harston Mill for Scientific Generics
and separate projects at Granta Park for Chiroscience/Cell Tech, Vernalis and Pfizer.
The last decade has seen us carry on with R&D laboratories for the Babraham Research
Campus, laboratories for AstraZeneca at Cambridge Science Park and laboratories for
Cancer Research UK at the Addenbrookes Campus. Last year we created new laboratories
at the Mawell Centre in an extension to the existing Physics of Medicine Building.
Integrated
Fire Protection
Systems
Fully addressable Fire
Alarm System including
Gas Suppression Systems
to Data Centres and
Aspirating Systems to the
Winter Garden Areas with
Interlinks to the Dry and
Wet Sprinkler Systems.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 24
Strategy in action
People – sustaining our key advantage
TClarke has kept a strong commitment to high-quality,
direct employment and industry-leading apprenticeships
and training. In 2017, the business sought to deepen
our ‘people advantage’ by launching the new TClarke
Training Academy.
How our people strategy delivers value
Sustaining the quality of our human resource
is our key strategic imperative. TClarke’s
operational capability is built on this reservoir
of in-house expertise and experience. Our
people deliver our market reputation for
quality and consistent attention to safety.
Their expertise and confidence is what allows
us to take on complex challenges and offer
a ‘can-do’ and non-confrontational approach
in our daily dealings with our partners and
clients. Put very simply, having excellent
people is the basis for everything we achieve
as a business – including the value we return
to our shareholders and the value we deliver
to the communities in which we work.
How our people strategy defines an
exceptional culture and brand
In 2017, TClarke’s safety operation was able
to report a strong safety performance for
the year. Although this has been primed
and driven by our safety team, they would
readily acknowledge that our safety record
depends on an ingrained culture which takes
safety seriously.
Apprentice intake in 2017
49
2016: 47
Average number of directly
employed staff
1,348
2016: 1,311
I started here as an apprentice eight years back and I’m
expecting to complete my HND in Quantity Surveying this
summer and go on to start an honours degree. Next month
Right now I’m finalising my electrical apprenticeship and in
the final months of my Building Services HNC. I’m currently
applying to university for a full Building Services B (ENG)
I’m down in London for a leadership seminar. The Company has
supported me and given me opportunities all the way. I’ve worked
on a lot of residential projects so far and I’m hoping to add
experience on larger commercial projects.
Degree. I’ve been fortunate to have had a lot of experience
working with British Aerospace, which is very clearly world class
in what it does. Winning Apprentice of the Year this year was a
highlight and you can see how all finalists progress in the Company.
Scott Cochrane – Trainee Quantity Surveyor
Jake Shorrock – Third year Electrical Apprentice
TClarke Annual Report and Financial Statements 2017 25
TClarke is in many senses a family; people
spend full working lives with the firm. People
recommend relatives and friends to join as
apprentices. We retain a very high percentage
of apprentices and many of them go on to
assume roles of leadership in the Company.
All of this contributes to making safety
something that matters personally.
Our people strategy is also critical in driving
a TClarke Way of doing things that takes
great pride in the quality of the job, right
down to the details of the installation. That’s
equally true in the installation of 33kV power
in a London office tower, in the plumbing for
a new home in Scotland or on a bespoke FM
project for a BAE manufacturing operation
in Lancashire.
The TClarke brand that results is a tangible
experience of service and collaboration – and
its strength in 2017 has allowed us to enter
new geographies and open three new offices
– and by offering the promise of TClarke
quality, win work immediately, from existing
clients and from new ones who know
our reputation.
Apprenticeships and training in 2017
This year, TClarke launched its Training
Academy. The Academy provides a range
of training, mentoring and education
opportunities that have been developed
specifically for each of the professional areas
in which we’re involved – from construction
engineering, design and QA to admin,
estimating and Intelligent Buildings.
The Academy defines clear career paths,
showing the skills you need at each stage,
in order to progress from junior to senior
roles in each area of professional specialism.
These routes ahead are mapped out for
everybody – whether you take professional
qualifications to the highest level, prefer to
develop a hands-on career, or would like to
switch into a new discipline. The Academy’s
training is led and designed by senior people
within the Company.
I was delighted to be awarded a first in my degree this
year – the hard work has paid off. My job now as a
mechanical designer involves working closely with
professional and construction teams and co-ordinating with
statutory authorities and specialists. This has been an excellent
environment for me to combine high-quality practical experience
with my university studies.
Vicky Mansell – Mechanical Designer
I’m working at 100 Bishopsgate – which is a massive tower
project and I’m on high-level containment. Although I am the
only female apprentice on site, everyone’s great with me and
when I get up in the morning I certainly look forward to coming to
work! My TClarke mentor is Hayley Phippen – she’s now a QS,
having served her time as a TClarke apprentice before me. She’s a
good role model in showing how you can progress in the Company.
I used to play football for Gillingham so I understand the relationship
between discipline, effort and motivation and a good result.
Emily Lyons – First year Electrical Apprentice
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 26
Corporate social responsibility
The Company reinforces its ongoing
commitment to conducting business with
honesty and integrity in a fair manner
Through high standards of corporate
governance and setting the ‘tone from the
top’, the Board is responsible for establishing
and monitoring policies which seek to
embed high ethical standards of behaviour
throughout the Group. The Company has
clear and concise policies in place to support
the business and enable TClarke to operate
in an open and transparent manner, including,
but not limited to: anti-bribery and corruption,
health and safety, environmental, sustainable
development, quality assurance, equal
opportunities, equality and diversity,
training and development, and other human
resources policies.
Health & Safety at TClarke
Health & Safety is at the core of our business
and is the ‘cornerstone’ of all our operations.
As such, we have continued our ongoing
investment in this area.
At the beginning of 2017, we scrutinised our
Health & Safety procedures and operations
and challenged ourselves to reduce the
Group’s Accident Statistics wholesale by
3%, and we are pleased to report that we
achieved our stated objective. This is even
more pleasing given the number of hours
being worked across our various demanding
projects and our record order book.
The Company expects its employees to
conduct themselves in a manner which
reflects the high calibre of the business,
with a personal commitment to compliance
with all applicable laws and regulations. The
Company has a zero tolerance policy towards
any form of bribery or corruption, and has an
appropriate procedure in place whereby any
concerns in relation to malpractice can be
raised in an appropriate forum.
Absolute Accident Reporting
The ‘Absolute’ Accident Reporting Regime,
which ensures each accident is reported
despite the level of severity, continues to
be used. Therefore, every accident which
occurs within the business, no matter how
apparently small or insignificant, is dutifully
recorded. No accident is accepted lightly, but
more importantly none are hidden, therefore
no statistic is buried.
It is our policy to ensure that the highest
possible standards are achieved and
maintained operationally throughout our
full scope of operation. We are proud to
operate a business management system in
accordance with the requirements of ISO
9001:2015 (Quality Management Systems).
The table below highlights the significant
reduction in accidents reported across the
Group in 2017 against the previous
year’s figures.
2017 vs 2016
Accident Statistics
2017
2016
-17%
2016>2017
We challenged
ourselves to reduce
the Group’s Accident
Statistics wholesale
by 3%, and we are
pleased to report
that we achieved our
stated objective
102
123
59
68
‘You See, You Say’
Reports Issued
+21.5%
2016>2017
2017
2016
2015
2014
4956
4076
3215
2286
TClarke Annual Report and Financial Statements 2017
27
In 2017 TClarke actively
trialled electric vehicles
in its fleet
Improved ‘You See, You Say’ figures
While the number of accidents is decreasing,
the number of ‘You See, You Say’ Near Miss
Reports has increased across the Group and
has done so for the past four years; see the
table on the opposite page.
It should be remembered that each ‘You See,
You Say’ card issued represents a potential
incident or accident which has been avoided,
addressed and ‘closed out’.
One of the most encouraging facts with
regard to the statistics is that they serve as
testament to an ever-increasing ‘buy in’ from
not only the TClarke teams, but the whole
supply chain. All our people and associates
have bought into our outstanding Health &
Safety culture, and this approach is at the
core of all our undertakings.
Knowledge is key
The H&S team continue their ever-increasing
quest for knowledge, with the following
courses currently being undertaken: NEBOSH
Construction Certificate, NEBOSH Diploma in
Occupational Health & Safety and Master of
Science in Occupational Health & Safety.
Safety initiative update
The latest initiative update has seen a
revision of the ‘Switched on to Safety’
Passport (H&S handbook/training records),
which for 2018 enters its 4th Edition.
Environment
TClarke recognises and accepts the known
environmental implications of its engineering
works and procedures.
As part of our commitment to sustainable
development, we undertake regular appraisals
as a means of identifying significant impacts
for our works, including: health and safety,
climate change and air quality, travel and
transport, energy consumption, noise
vibration, water and drainage, geology
and soils and wastage.
TClarke maintains an Environmental
Management System accredited to ISO
14001:2015 to provide its clients and other
stakeholders with verifiable evidence that
environmental performance is integral to
business management.
As a registered waste carrier, we ensure
that materials are handled and disposed
of in a manner that does not damage the
environment or cause pollution. Furthermore,
the Company aims to recycle so far
as practicable.
Energy consumption was measured
across the Group by recording data on
the combustion of fuel and the use of
electricity at its facilities.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 28
Corporate social responsibility continued
Greenhouse gas emissions
As a responsible company we take our
environmental responsibilities seriously. This
is the fifth 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.
Energy consumption was measured
across the Group by recording data on the
combustion of fuel and the use of electricity
at its offices and facilities, and we have
collated Scope 1 and Scope 2 emissions
data for the year ended 31st December
2017 across the Group companies,
which are reported in our consolidated
financial statements.
Our GHG emissions have been calculated
using UK Government guidelines for
conversion of fuels and electricity.
2017
Scope 1 emissions
Scope 2 emissions
Total scope
1 & 2 emissions
Revenue
Emissions/
£1m revenue
2016
Scope 1 emissions
Scope 2 emissions
Total scope
1 & 2 emissions
Revenue
Emissions/
£1m revenue
Measure
tCO2e
tCO2e
tCO2e
£m
Measure
tCO2e
tCO2e
tCO2e
£m
London &
South East
Central &
South West
North
Scotland
142
106
248
177.6
703
51
754
62.6
377
32
409
48.0
394
34
428
23.0
Total
1,616
223
1,839
311.2
1.4
12.0
8.5
18.6
5.9
London &
South East
Central &
South West
North
Scotland
129
113
242
142.9
1,005
51
1,056
67.9
317
42
359
53.6
285
37
322
21.0
Total
1,736
243
1,979
285.4
1.7
15.6
6.7
15.3
6.9
Definitions:
1. Scope 1 emissions Combustion of fuel and operation of facilities
2. Scope 2 emissions Electricity purchased from the national grid
3. tCO2e
Tonnes carbon dioxide equivalent
TClarke Annual Report and Financial Statements 2017
29
In 2017, our regional offices organised
various fundraising events for national and
local charities, and supported their local
communities, including the annual TClarke
London Christmas raffle, which raised money
for the Evelina London Children’s Hospital.
TClarke Scotland’s Gary Jackson and John
Boyle took part in March for Men, in aid of
Prostate Cancer UK, and many staff members
ran marathons around the country in aid of
various charities.
Supporting charities and
local communities
TClarke is proactive in its corporate
responsibility to the local and wider community
in which we work. We engage in initiatives
with our communities by liaising with local
schools, attending career open days, holding
skills workshops and offering work placements
for young and mature trainees.
In addition to the support we give to providing
employment to the local and wider community,
TClarke and its people value the contribution
we can make through supporting charitable
organisations and sponsored events. The
Company also sponsors local football and
cricket teams throughout the regions.
In early summer, our team
from the 22 Bishopsgate
project took part in the 2017
Dragon Boat Race organised
by Multiplex in aid of the
Chickenshed charity
Left: Walton Le Dale Juniors
Under 10s football team
Right: TClarke South West’s
Vicki Knight running in the
London Marathon
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 30
Corporate social responsibility continued
Diversity and equality
The Group maintains an equality and diversity
policy, selecting and promoting employees
based on their aptitudes and abilities. TClarke
is committed to providing equal opportunities
to all current and future employees and
values the differences that a diverse
workforce can contribute to the organisation.
When recruiting, TClarke gives full and fair
consideration to suitable applicants, having
regard to individuals’ aptitudes and abilities,
and takes responsibility for its obligations
towards employment of disabled people.
The Company is committed to ensuring that
any individual who becomes disabled during
the course of their employment remains in
their own role, where possible, or is employed
in another suitable position. Training, career
development and promotion of disabled
employees should, as far as possible, be
identical to that of other employees.
The Company is committed to ensuring that
everyone is treated equally regardless of
disability or any other condition which cannot
be shown to be relevant to performance.
London apprentice
intake in 2017
TClarke Annual Report and Financial Statements 2017 We recognise the need
to attract and retain
excellent staff which
give TClarke the great
reputation we are
renowned for
31
Investing in our workforce
Our people are our biggest asset, and we
recognise the need to attract and retain
excellent staff which give TClarke the great
reputation we are renowned for. Creating
shareholder value is ultimately dependent on
the skill, dedication, reliability and motivation
of our workforce, and we prioritise investment
in our employees as a key success factor.
Since the launch of the TClarke Training
Academy and Career Pathway in January
2017, we have successfully rolled out our
plan of monthly training modules to our
new trainees and experienced staff to ensure
all staff are trained in TClarke’s procedures
and kept up to date with new systems
and technologies.
We have carried out appraisals with all staff
members, including our site supervision,
which has been invaluable to allow us to
understand our staff’s training needs and
helping them meet their career aspirations.
We have paired junior team members with
senior mentors to assist them in their journey
within TClarke. This ensures that TClarke’s
values and aspirations are understood
throughout the business.
We ensure employees are kept informed
and take appropriate steps to ensure that
we communicate with our employees in an
effective manner to notify everyone regarding
matters that are of concern to them and
factors that affect the performance of the
Company. During 2017, the Company
launched a new regular newsletter for
employees, ‘Pipes & Wires’, to keep everyone
up to date with what is happening across the
Group. When the Company needs to make
decisions which affect our people’s interests,
we consult with employees, or their
representatives, and value their opinions
when making decisions which affect
their interests.
We are proud to have introduced Mental
Health First Aid training sessions to enable
staff to become qualified Mental Health
First Aiders. This is a big step forward within
the industry and proves how serious TClarke
is about managing every aspect of our
employees’ health and wellbeing.
TClarke is committed to compliance with the
Modern Slavery Act 2015. A statement which
sets out our actions to comply with the
requirements of the Act appears on the
Group’s website: www.tclarke.co.uk.
The Group has a number
of Health & Safety teams
across the UK. This is the
Health & Safety team
based in London
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 32
Principal risks
Risk management
The ability of the Group to identify and
manage effectively the risks to its business
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.
During the year ended 31st December 2016
the Group identified a significant fraud
within the finance function of a subsidiary
undertaking involving the misappropriation
of funds over a number of years. As a result
we have implemented a revised internal
control framework resulting in standardised
processes across the Group and segregation
of duties both geographical and functional.
Systems access has been overhauled.
Our risk management process
The Group’s risk management framework
requires all business units to identify, assess
and quantify the specific risks facing them
which could impact on their ability to deliver
their financial and operational objectives.
The business units maintain a register of the
significant 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.
Principal risks
The principal risks faced by the Group, and
the mitigating actions and controls in place
to address these risks, were reviewed in
March 2018 and are presented below.
Risk
Strategy
impact
Mitigation
Political, economic and market conditions
Change
from
2016
Main drivers
for change
1. The construction sector is
highly cyclical. The Group is
dependent on the planned
level of construction and
maintenance expenditure
by both the public and
private sectors.
2. 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.
Advance our
partnerships
nationwide
1. The Group continues to operate throughout
the UK using its core M&E skill base to enable
agile movement in and out of sectors to meet
changing market demands.
Take
opportunities
in specialist
markets and
sectors
2. The Group monitors its order book to ensure
an appropriate balance of work between
London and the regions and across the various
sectors in which it operates.
3. The Group develops long-term client and
Mirror
principal
contractors
regionally
and focus
on targeted
tendering
contractor relationships and seeks to secure
framework agreements to mitigate against
demand fluctuations.
4. Cost and skills bases are aligned to reflect
anticipated work load.
5. The Group monitors legal and regulatory
developments in the areas in which it operates,
and seeks legal or other specialist advice as
appropriate. All employees, suppliers and
subcontractors are required to comply with
all applicable laws and regulations. Training
is provided on legal and regulatory changes
as required.
TClarke Annual Report and Financial Statements 2017 33
Risk
Strategy
impact
Mitigation
Change
from
2016
Main drivers
for change
Financial strength
The Group’s ability to secure
and deliver work depends on
its perceived financial strength
and the availability of cash
resources, banking facilities
and the ability to provide
performance and other bonds
as necessary.
Enhance our
core business
Advance our
partnerships
nationwide
1. Capital structure and dividend policy managed
to ensure adequate reserves maintained to
fund growth strategy.
2. The Group monitors cash flow requirements
and seeks to match maturity profiles of
financial assets and liabilities at contract level.
3. Efficient utilisation of resources monitored via
Group-wide business management system.
4. The Group has in place a £10 million revolving
credit facility, committed to 31st March 2020,
and a £5 million overdraft facility to help
manage short-term fluctuations in working
capital.
5. The Group also has in place £20 million
committed bonding facilities.
6. Creditworthiness of counterparties monitored
on an ongoing basis.
The Group’s banking
facilities comprise a
committed £10 milion
revolving credit facility to
31st March 2020 and a £5
million overdraft facility.
Cash generation has
strengthened the
balance sheet.
Good underlying
performance during 2017.
Reputation
The Group’s ability to tender
for new business and to
maintain strong relationships
with customers is dependent
on maintaining its reputation
for leadership in technological
innovation and quality
of delivery.
Winning new work
Our ability to secure profitable
new work is dependent on our
ability to:
• adequately resource tenders;
• understand the technical
and commercial challenges
incumbent in each tender;
and
• 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.
Enhance our
core business
1. The Group supports high standards of business
ethics, sustainability and compliance, and is
committed to improving health and safety
at work for all.
2. Feedback is sought from key stakeholders
on a regular basis and actions arising from
this feedback are discussed and agreed at an
appropriate level.
Mirror
principal
contractors
regionally
and focus
on targeted
tendering
Take
opportunities
in specialist
markets and
sectors
1. Focus on strong relationships enables us
to understand client needs and focus our
tendering activity accordingly.
2. We have experienced teams of estimators
throughout the country, with all bids reviewed
by a Director and checks carried out to avoid
incorrect or non-competitive pricing.
3. The Board remains committed to the
principle that we will not bid for work below
commercially acceptable rates.
4. A detailed business case is prepared for any
proposed expansion into new geographic areas
or business sectors, and is subject to prior
Board approval.
Tender prices and margins
are improving as clients and
contractors seek to lock in
scarce M&E resource.
The Group’s order book
continues to be replenished.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 34
Principal risks continued
Risk
Strategy
impact
Mitigation
Contract delivery
The Group concurrently runs
several hundred contracts
across the country, some
of huge complexity. These
require high-quality, proactive
management to ensure
delivery of value objectives
for all stakeholders. Failure
to deliver could result in
significant financial and
reputational damage.
1. Ongoing assessment and management of
operational risk throughout project lifecycle.
2. Train and maintain industry leading teams
of directly employed engineers, surveyors,
supervisors and skilled tradespeople.
3. Regular performance reviews of all key
suppliers and subcontractors.
4. Insurance cover reassessed each year, to guard
against liability claims.
5. Profit and cash flow are monitored throughout
the project lifecycle, with regular reviews at
contract and business unit level.
6. Contracts of a significant size or risk are
regularly reviewed by Executive Management
and discussed at Board level.
Sustain our
resource
advantage
Mirror
principal
contractors
regionally
and focus
on targeted
tendering
Take
opportunities
in specialist
markets and
sectors
People and skills
Attracting, retaining and
developing high-calibre staff
and skilled tradespeople is key
to our ability to deliver value for
our stakeholders.
Sustain our
resource
advantage
1. The Group remains committed to providing
apprenticeships, career paths and ongoing
training and development for all employees.
2. Remuneration packages for all staff are linked
to performance and monitored to ensure they
remain competitive.
3. 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.
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.
Sustain our
resource
advantage
1. The Group Managing Director has overall
responsibility for health and safety, ensuring
safety is prioritised throughout the Group.
2. The Group Health and Safety Director
monitors and responds to legal and regulatory
developments.
3. Industry leading health and safety policies and
procedures are maintained.
4. All employees receive regular training and
updates to ensure they are aware of their
responsibilities.
5. All employees, suppliers and subcontractors
are required to comply with all applicable laws,
regulations and standards.
Change
from
2016
Main drivers
for change
The Group is benefiting from
its focus on relationships
and targeted tendering
approach with an
improvement in the overall
quality of secured work.
The Group’s core resources
of skilled tradesmen and
project delivery teams gives
it a key advantage over
competitors dependent
on external resources for
project delivery.
As the construction sector
grows, increasing demand
for scarce engineering,
commercial and site-
based resources is making
recruitment and retention of
employees more difficult.
Group has in place
apprenticeship programmes.
In 2017 we introduced a
programme to identify and
support future leaders of
the business.
TClarke Annual Report and Financial Statements 2017 35
Risk
Strategy
impact
Mitigation
Change
from
2016
Main drivers
for change
Supply chain
To deliver projects to the
correct specification and to
budget requires the availability
of components and materials
of sufficient quality and at the
right price. The majority of
projects we secure do not allow
for the recovery of increased
material costs.
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.
Advance our
partnerships
nationwide
1. Formal supplier framework agreements
are maintained to mitigate this risk, with
prices locked in through procurement at the
beginning of a contract wherever possible.
2. Regular performance reviews of all key
suppliers and subcontractors.
Sustain our
resource
advantage
1. The Group’s defined benefit scheme closed
to new members from January 2015.
2. Ongoing regulatory and funding requirements
are monitored in conjunction with external
actuarial advisers and regular meetings are
held with the pension scheme trustees.
Actuarial assumptions,
driven by falling bond
yields, have significantly
increased the Group’s
exposure to defined
benefits pension risk.
The triennial valuation
of the scheme as at 31st
December 2015 showed
that the scheme deficit had
increased and the Group
will need to make additional
contributions to clear
the deficit.
IT systems
The efficient operation of the
Group is dependent on the
proper operation and security
of its IT systems.
Sustain our
resource
advantage
1. The Group has implemented a system-wide
business management system and undertakes
a process of continual improvement.
2. The Group maintains robust cyber security
policies to guard against third party access
and malicious attacks.
A thorough review of all
access rights has been
undertaken and weaknesses
addressed. Revised internal
control framework has been
defined and implemented.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 36
Long-term viability statement
threats to the financial viability of the Group
over the three-year projection period. These
sensitivities include changing assumptions
with regard to margins, workload and liquidity
of financial assets and liabilities. The key
assumptions underlying the financial model
include the renewal and continuing availability
on similar terms of the Group’s existing
banking facilities, which comprise a £5 million
overdraft facility repayable on demand and a
committed £10 million revolving credit facility
expiring on 31st March 2020, and the ability
to flex the cost base sufficiently to address
any significant change in workload. The
three-year projections demonstrate that,
taking into account any reasonable
sensitivities, the Group will be able to operate
within its existing facilities over the three-year
projection period, and the Directors are
confident, as demonstrated by our experience
during the recent recession, that the Group’s
business model allows sufficient flexibility to
meet any significant change in demand for
its services.
The Group takes a conservative approach
to strategic risk. The business case for all
significant investments and entry into or
exit from specific markets is reviewed and
signed off by the Board. Risk registers
are maintained and reviewed regularly
throughout the year to identify potential
threats to the Group’s business, to assess
the financial, operational and strategic
impact of these threats, and to determine
appropriate mitigating actions.
Based on their assessment of prospects and
viability above, the Directors confirm that
they have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due
over the three-year period ending 31st
December 2020.
The Directors also considered it appropriate
to prepare the financial statements on the
going concern basis, as explained in note 3A
on page 93.
The Directors have assessed the Group’s
prospects and viability, taking into account
its current position and the principal risks
outlined on pages 32 to 35.
The nature of the Group’s business is long
term and its business model is open-ended.
The UK construction market in which the
Group operates is subject to considerable
peaks and troughs. The Directors consider a
three-year period as appropriate for assessing
the ongoing viability of the Group. Most
of the projects undertaken by the Group are
completed within a three-year time horizon
from initial tender. The Group uses a
three-year time frame for the preparation
of its strategic business plans and financial
projection models.
The Group’s prospects are assessed primarily
through its strategic business planning
process and the ongoing monitoring of the
principal risks and mitigating actions. The
process is led by the Chief Executive and
involves Senior Management throughout
the Group.
All business units formally update their
strategic plans on an annual basis.
This process, which takes place in the
fourth quarter each year, includes:
• an assessment of the business unit’s
current position, taking into account its
operating environment and the threats
and opportunities it faces;
• the business unit’s achievements over the
previous 12 months measured against its
strategic objectives;
• a detailed review of the risks faced by the
business units and the strength of the
controls and mitigating actions in place;
• the agreement of financial and strategic
targets covering the following three
years; and
• the preparation of detailed budgets and
projections for the next three years in
support of the strategic business plan.
The business unit strategic plans are formally
reviewed and challenged by the Executive
Directors prior to presentation to the
full Board.
Based on the financial models submitted
by the business units, the Group’s financial
projections are updated and tested using
a range of sensitivities to identify potential
TClarke Annual Report and Financial Statements 2017 37
Having successfully completed the
shell and core project at Rathbone
Square, TClarke went on to deliver
the fit out for Facebook’s new HQ
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 38
Group financial review
Trevor Mitchell
Finance Director
> Underlying profit in line with market
expectations
> Excellent progress made on strategic
financial targets of:
1. Strengthening cash position
(26% increase year on year after
investments); and
2. Utilising cash to invest in technology
through purchase of Eton Associates
(Building management system
specialist) and building prefabrication
facility at Stansted (cash cost
approximately £2.5 million in 2017)
> Completion of the Group reorganisation
resulting in the Group’s operating
entities being within a single
statutory entity
Summary of financial position
Continuing operations
Revenue
Operating profit
– Underlying1,2
– Reported
Profit/(loss) before tax
– Underlying1
– Reported
Profit/(loss) after tax
– Underlying1,2
– Reported
Discontinued operations
Profit/(loss) for the year
Earnings per share:
– Underlying2
– Continuing operations
– Reported
Dividend per share
2017
£m
2016
£m
311.2
278.6
7.3
7.9
6.5
7.1
5.2
5.6
–
5.6
6.9
4.4
6.2
3.7
4.9
2.9
(0.5)
2.4
12.37p
13.44p
13.44p
11.60p
6.74p
5.45p
3.5p
3.2p
1 Underlying operating profit and profit before tax are stated before
amortisation of intangible assets and non-underlying items – see note 7
to the financial statements.
2 Underlying earnings is calculated by dividing underlying profit after tax by
the weighted average number of shares in issue.
2017 underlying Group performance
Group revenue rose by 12% to £311.2 million for the year
(2016: £278.6 million). Group underlying operating profit
increased by £0.4 million to £7.3 million. London and South
East delivered particularly strong revenue and margin growth.
Scotland and the North also delivered a growth in profits but
Central and South West had a poor first half trading, resulting
in an underlying loss for the year. Overall operating margins
2.3% (2016: 2.5%). Net underlying overheads as a
percentage of revenue were 10% (2016: 9.2%). We move
into 2018 with a replenished high-quality order book of
£337 million (2016: £330 million).
London and South East
Revenue from our London and South East operations
increased by 24% to £177.6 million (2016: £142.9 million),
generating an underlying profit of £8.5 million (2016: £3
million). Underlying operating margin increased to 4.8%
(2016: 2.4%). The operating margin increase is in part due
to a number of large jobs completing in the period thereby
releasing significant profits.
For 2018 the region is engaged on a number of high profile
shell & core commercial developments, all of which offer
future fit out opportunities. A number of areas continue to
be regenerated and offer large-scale mixed commercial and
TClarke Annual Report and Financial Statements 2017 residential opportunities such as the International Quarter
in Stratford and Battersea Power Station and Croydon. The
development of our manufacturing facility at Stansted and the
acquisition of Eton Associates will assist in us offering our clients
a broader range of capability from within the TClarke Group.
Central and South West
Revenue from our Central and South West operations reduced by
7.8% to £62.6 million (2016: £67.9 million). Underlying loss was
£1.8 million (2016: profit £0.9 million). The underlying loss reflects
a number of delayed starts in the South West coupled with
settlement of a number of legacy jobs. Looking forward, South
West has its budgeted turnover secured for 2018 with good quality
jobs. As a result, the region is expected to be profitable in the
current period.
In the Central area we continue to target opportunities in the
residential, retail and FM markets. We aim to build our presence
in the Birmingham and Cambridge markets, building upon recent
successful completions and activity in these areas.
Revenue
Scotland
North
Central and South West
London and South East
£23m
£21m
£16.1m
£48m
£53.6m
£41.8m
£62.6m
£67.9m
£56.9m
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
£177.6m
£142.9m
£129.1m
Underlying operating margin
Scotland
North
2017
2016
2015
2017
2016
2015
3.5%
2.9%
1.9%
5%
3.4%
4.5%
Central and South West
2017
-2.9%
London and South East
2016
2015
2017
2016
2015
1.5%
1.2%
2.4%
1.5%
4.8%
39
North
In the North, revenue reduced by 11.7% to £48 million
(2016: £53.6 million), and underlying operating profit
increased to £2.4 million (2016: £1.8 million). The
underlying operating margin was 5% (2016: 3.4%);
this increase was the result of a particularly strong
performance from the Leeds office due to a number of
educational projects and a growing small works offering.
Looking forward, Newcastle aims to maintain
its revenues with particular focus on regional
opportunities within the education sector and
a number of social housing opportunities. Leeds
continues to see opportunities from its recently
developed relationships, notably in education and
other public sectors such as prisons. In the North West
we aim to build our presence in the key Manchester
area, building upon local relationships supported by
secured works at BAE, Springfield Nuclear Fuels and
for Manchester Airport Group.
Scotland
Scotland’s revenue was £23.0 million (2016:
£21.0 million), and underlying operating profit was
£0.8 million (2016: £0.6 million), representing an
underlying operating margin of 3.5% (2016: 2.9%).
Scotland’s strong performance was due to its
collaboration on Intelligent Buildings with the London
Operation. As well as its continuing strength in the
residential market, Scotland has generated significant
IT, mechanical and electrical work streams in the
commercial sector.
TClarke Scotland continues to expand, focusing on
its key sectors Residential and Technologies under the
TClarke Intelligent Buildings banner. There remains
a good level of opportunity in these sectors around the
Scottish central belt and further afield in key Scottish
towns where we have a presence, such as Aberdeen
and Dumfries. Whilst M&E Contracting remains a key
part of the business, we remain alert to the more
competitive nature of this sector.
Non-underlying items
Exceptional and non-underlying items comprise
amortisation of intangible assets of £0.2 million (2016:
£0.2 million), Eton acquisition costs of £0.2 million and
a recovery of misappropriation of funds that occurred
in 2016 of £1.0 million (2016: charge of £2.3 million).
Finance costs
Net finance costs were £0.8 million (2016: £0.7 million),
including a £0.6 million (2016: £0.5 million) non-cash
finance charge in respect of the Group’s defined benefit
pension scheme. Net interest on bank loans and
overdrafts remained at £0.2 million (2016: £0.2 million),
reflecting good cash performance throughout the year.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 40
Group financial review continued
Earnings per share
Basic earnings per share after discontinued
operations increased to 13.44p (2016: 5.45p),
with basic earnings per share from continuing
operations increasing to 13.44p (2016: 6.74p).
Basic underlying earnings per share after
adjusting for amortisation of intangible assets
and non-underlying costs and the tax effect
of these items, was 12.37p (2016: 11.60p).
Dividends
The Board is proposing a final dividend of
2.9p (2016: 2.7p), with the total dividend for
the year increasing by 5% to 3.5p (2016:
3.2p). The dividend is covered 3.5 times by
underlying earnings.
The final dividend will be paid, subject to
shareholder approval, on 25th May 2018 to
those shareholders on the register at 27th
April 2018. The shares will go ex-dividend on
26th April 2018. A dividend reinvestment plan
(‘DRIP’) is available to shareholders.
Earnings per share
Underlying
Continuing operations
Reported
Net cash balance
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
8.16p
6.74p
6.66p
12.37p
11.6p
13.44p
13.44p
5.45p
0.13p
£11.7m
£9.3m
£6.7m
Pension obligations
The triennial valuation of the pension scheme
at 31st December 2015 showed a deficit of
£14.9 million, representing a funding level of
67% (2012 valuation: deficit £11.5 million,
funding level 68%).
The Group has been pursuing an agreed
deficit reduction plan over a number of years;
however, market factors have meant that
the deficit has not been reduced as intended
and the cost of funding current pension
commitments has increased. Following
agreement of the 2015 valuation, the Group
has proposed a revised deficit reduction plan
which includes making additional contributions
and continuing to provide security to the
pension scheme in the form of a charge over
property assets up to a combined market
value of £3.1 million. From 1st January 2017
the future service contribution increased
to 21.4% of pensionable payroll (including
employee contributions) and the deficit
reduction contribution has been set at
£1.0 million for the year ending 31st
December 2017, £1.25 million for the year
ending 31st December 2018 and £1.5 million
per annum thereafter. Employee contributions
have increased from 8% to 10%.
The scheme is closed to new members and
the Group continues to meet its ongoing
obligations to the scheme.
In accordance with IAS 19 ‘Employee Benefits’,
an actuarial expense of £2.3 million, net of tax,
has been recognised in reserves, with the
pension scheme deficit increasing by £2.8
million to £23.4 million (2016: £20.6 million).
Cash flow and funding
Net cash balances improved to £11.7 million
at 31st December 2017 (2016: £9.3 million)
after deducting the £5.0 million (2016: £3.0
million) outstanding under the Group’s
revolving credit facility. The balance is after
the purchase of Eton Associates (£1.5 million
cash in 2017) and the investment in the
Stansted prefabrication facility (£1 million).
The Group retains a £10.0 million revolving
credit facility, which is committed until
31st March 2020, and a £5.0 million overdraft
facility, renewable annually. Interest on
overdrawn balances is charged at 2.25%
above base rate, and interest on balances
drawn down under the revolving credit
TClarke Annual Report and Financial Statements 2017
41
facility is charged at 2.25% above LIBOR,
fixed for the duration of each drawdown
(typically three to six months). The Group
was compliant with the terms of the facilities
throughout the year ended 31st December
2017 and the Board’s detailed projections
demonstrate that the Group will continue
to meet its obligations in the future.
Accounting policies
The Group’s consolidated financial statements
are prepared in accordance with International
Financial Reporting Standards (‘IFRSs’)
as adopted by the European Union.
There have been no significant changes to
accounting policies during the year ended
31st December 2017.
The Group also has in place £32.5 million
of bonding facilities, of which £21.9 million
were unutilised at 31st December 2017.
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.
The strong underlying performance of the
Group was partly offset by the increase in
the pension deficit resulting in shareholders’
equity rising by £2.3 million during the year
to £16.4 million (2016: £14.1 million).
Goodwill and intangible assets increased
to £25.3 million (2016: £22.8 million). This
was due the acquisition of Eton Associates.
Goodwill and intangible assets arising on
previous acquisitions represent a significant
proportion of the Group’s total assets of
£144.9 million (2016: £121.5 million). The
Board has undertaken a rigorous impairment
review in respect of the intangible assets
at 31st December 2017 and concluded that
no impairment is necessary.
Group reorganisation
During the year we completed the
implementation of the Group reorganisation,
bringing all the Group’s operations together
into a single statutory entity, TClarke
Contracting Limited, with a separate
statutory entity, TClarke Services Limited
providing engineering and support services
to the enlarged operating company. This
reorganisation represents the culmination
of a process of rationalisation and increased
consistency of organisation and enabled the
implementation of a new internal control
framework and procedures.
Financial risk management
The Group’s main financial assets are contract
and other trade receivables and cash and
bank balances. These assets represent the
Group’s main exposure to credit risk, which
is the risk that a counterparty will fail to
discharge its obligations, resulting in financial
loss to the Group. The Group may also be
exposed to financial and reputational risk
through the failure of a subcontractor
or supplier.
The financial strength of counterparties is
considered prior to signing contracts and
reviewed as contracts progress where there
are indications that a counterparty may be
experiencing financial difficulty. Procedures
include the use of credit agencies to check
the creditworthiness of existing and new
clients and the use of approved suppliers’
lists and Group-wide framework agreements
with key suppliers.
Trevor Mitchell
Finance Director
27th March 2018
Strategic report approval
The Board confirms that, to the best of
its knowledge, the Strategic report on
pages 4 to 41 includes a fair review of
the development and performance of the
business and the position of the Company,
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
Approved by the Directors and signed on
behalf of the Board on 27th March 2018.
Mark Lawrence
Chief Executive Officer
27th March 2018
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 42
Board of Directors
3
6
5
4
7
1
2
TClarke Annual Report and Financial Statements 2017 43
Executive Directors
1
Mark Lawrence
Group Chief Executive Officer
Appointed to the Board on 2nd May 2003. Age 50.
Mark has been with the Company for 32 years and started his
career here by completing an electrical apprenticeship in 1987.
His career progressed through the Company, becoming Technical
Director in 1997, Executive Director in 2003 and Managing
Director, London Operations in 2007. As Group Chief Executive
Officer since January 2010, Mark has led strategic change across
the Group and remains a hands-on leader, taking personal
accountability and pride in TClarke’s performance and, ultimately,
our clients’ satisfaction. He regularly walks project sites and gets
involved personally with many of our clients, contractors and
our supply chain.
2
Mike Crowder
Group Managing Director
Appointed to the Board on 1st January 2007. Age 53.
Mike has over 25 years of significant experience in the
construction industry and started at TClarke as an apprentice.
His vast project-based experience includes the delivery of many
flagship jobs and a detailed knowledge of large infrastructure
projects. Mike has overall responsibility for Operations and
ensuring that all projects are properly managed. He also monitors
our engineering departments and projects on a regular basis as
a main Board Director. Mike is responsible for Group health and
safety, and is actively involved with health and safety risk
management and with raising awareness, influencing attitudes
and changing behaviour.
3
Trevor Mitchell
Group Finance Director
Appointed to the Board on 1st February 2018. Age 57.
Trevor is a Chartered Accountant and accomplished finance
professional with extensive experience across many sectors,
including financial services, construction and maintenance,
education and retail, working with organisations such as Balfour
Beatty plc, Kier Group plc, Rok plc, Clerical Medical Group and
Halifax plc. Prior to his appointment, Trevor had been working
with TClarke since October 2016, assisting with simplifying the
structure and improving the Group’s financial controls and
procedures. Trevor is a director of It’s Purely Financial Limited.
Non-Executive Directors
4
Iain McCusker
Chairman
Nomination Committee Chairman
Appointed to the Board on 1st January 2009. Age 66.
Iain is a Chartered Accountant and former partner at Coopers
& Lybrand. He has significant international financial and
management experience, gained through senior executive roles
at Xerox, Unisys and ACCA. This includes in-depth commercial,
operational and risk management experience. Iain is a former
member of the Qualifications Board of the Institute of Chartered
Accountants of Scotland. He is a Visiting Fellow at Cass Business
School and Chairman, NPA Insurance and a former Non-
Executive Director of Cripps LLP.
5
Tony Giddings
Senior Independent Non-Executive Director
Remuneration Committee Chairman
Appointed to the Board on 1st October 2014. Age 66.
Tony holds a BSc in Building Administration and is a Fellow
of the Chartered Institute of Building. Tony has had a long
and successful career in property development, including
the delivery of over £1.8 billion in construction projects.
He has previously held Board positions at Argent LLP and the
British Council for Offices and was Chairman of the Design
and Build Foundation from 2001 to 2003. Tony is a Trustee
of CRASH and Director of London South Bank University.
6
Mike Robson
Independent Non-Executive Director
Audit Committee Chairman
Appointed to the Board on 18th November 2015. Age 57.
Mike is a Chartered Accountant with extensive experience of
audit, financial management and reporting, gained at PwC
and in industry. In a career including 23 years of Board-level
experience, Mike has worked in a range of business sectors
as Finance Director, Managing Director, owner or adviser. He
has a strong focus on improving business performance and
developing management teams. Mike has also launched,
developed and successfully sold his own internationally based
business. Mike also serves as Director of Azure Partners Ltd.
7
Peter Maskell
Independent Non-Executive Director
Appointed to the Board on 1st January 2018. Age 60.
Peter joined Philips Electronics after studying Electrical and
Electronic Engineering at Kingston University and he worked
there for 37 years. For the last 20 years, he held a number
of senior management positions in both the UK and Europe.
His last position was as Chairman of the UK group, which
had significant business interests in both the healthcare and
lighting sectors. In the last five years in the UK, he managed
the transformation of the lighting business from product
supplier to a full service, systems and solutions provider,
fully exploiting the opportunities and benefits offered from
the advent of solid state LED lighting and fully connected
digital solutions beyond just illumination. Peter is also a non-
executive member of the board of the University of Surrey.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 44
Group Management Board
5
6
2
7
4
8
3
1
9
TClarke Annual Report and Financial Statements 2017 45
1
Mark Lawrence
Group Chief Executive Officer
(See Board of Directors, page 43, for biography)
2
Mike Crowder
Group Managing Director
(See Board of Directors, page 43, for biography)
3
Trevor Mitchell
Group Finance Director
(See Board of Directors, page 43, for biography)
4
Gary Jackson
Managing Director, Scotland
Gary has over 25 years’ experience in the construction industry,
the last 15 years at TClarke Scotland. As Managing Director of
TClarke Scotland, Gary was originally responsible for developing
and leading our successful Residential Plumbing service, and
has since developed our M&E Building services operations within
the Scottish region and our Intelligent Buildings operations
throughout the Group. As part of his role on the Group
Management Board, Gary is also directly responsible for Group
fleet management and procurement, as well as supporting
the Board with his knowledge of HR and Health & Safety.
5
Kevin Mullen
Managing Director, Northern region
Kevin has spent 36 years with the Company, having joined
Veale-Nixon Ltd in February 1982 and completed his
apprenticeship in 1983 and qualified as a JIB electrician. Kevin
steadily progressed through the business to Technical Director,
Assistant Managing Director and eventually taking the position
of Managing Director of the Newcastle office in 2012. Following
this appointment, Kevin took responsibility for the Leeds office
in 2013 and the North West office in 2016, becoming the
Northern region Managing Director with responsibility for the
management of the Northern region over those three offices.
6
Kevin Bones
Managing Director, Central and South West
Kevin has worked for TClarke for over 40 years in varying
capacities. Kevin now oversees the operations of the
Peterborough, Derby, Birmingham and Kimbolton offices
in his role as Managing Director, Central and South West.
7
Andy Griffiths
Group Systems Director
Andy joined TClarke in 1986, initially working with the
project management teams before becoming the first
TClarke project surveyor. After being project based for
many years, he managed the London surveying department
before becoming the London Commercial Director. He was
involved with the initial implementation of Coins in 2008
and has since worked on the Group reorganisation project
and now oversees the central processing centre in Derby.
8
Garry Julyan
Commercial Director
Garry joined TClarke in 2010, has over 20 years of experience
working in the construction industry and is a Chartered Quantity
Surveyor who has worked previously for principal contractors
and consultant organisations. As Commercial Director, Garry
is responsible for implementing the commercial strategy of
the business, providing commercial and contractual support,
identifying risk and opportunity, and overseeing the financial
performance of projects to ensure a commercial return.
9
David Lanchester
Company Secretary
David joined TClarke in April 2017, was appointed Company
Secretary on 26th April 2017 and is responsible for all legal
matters for the Group. David is an Associate of the Institute
of Chartered Secretaries and Administrators, and has 35 years’
broad company secretarial experience and has held Company
Secretary roles in listed plcs across a range of sectors.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 representatives of the regional businesses, details of which
are provided on pages 44 and 45.
During 2017, we undertook a formal, internal evaluation of the
Board’s and its committees’ effectiveness. The results of this
exercise are summarised on page 49. I am pleased to report
that I am satisfied that the Board and each of the Directors
are operating effectively. I am therefore happy to recommend
that those Directors standing for re-election should be
re-elected at the 2018 AGM.
As Chairman, I will continue to evolve our governance
framework, being mindful of best practice and the latest
developments surrounding corporate governance.
Iain McCusker
Chairman
27th March 2018
46
Corporate governance report
Iain McCusker
Chairman
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 2016 (‘the Code’).
The Code sets out principles to which the Listing Rules require
all listed companies to adhere, supported by more detailed
provisions. This governance section describes the principal
activities of the Board and its committees and how the
Company complies with the Code.
As a Board, we recognise that a high standard of corporate
governance is essential to support the growth of our business
and to protect and enhance shareholder value. The Directors,
whose names and details are set out on pages 42 and 43,
are collectively responsible to shareholders for the long-term
success of the Company. The Board does this by supporting
entrepreneurial leadership from the Company’s executive
team whilst ensuring effective controls are established that
enable the proper assessment and management of risk. The
Board is ultimately responsible for the Company’s strategic
aims and long-term prosperity; it seeks to achieve this by
ensuring that the right financial resources and human talent
are in place to deliver the Company’s strategy and objectives.
The day-to-day management and leadership of the Company
is delivered by the Group Management Board, which
comprises the Executive Directors and other key members
of the Group’s senior management team, including
TClarke Annual Report and Financial Statements 2017 Statement of compliance
David Lanchester
Company Secretary
Throughout the year ended 31st December 2017, the Board
considers that it has complied with the provisions of the UK
Corporate Governance Code 2016 (‘the Code’). The Code is
issued by the Financial Reporting Council (FRC) and is publicly
available on the FRC’s website, www.frc.org.uk
Structure of the Board
The Company is managed by the Board of Directors, which
currently consists of four Non-Executive Directors (including
the Chairman) and three Executive Directors. All of the
Directors who served during the year ended 31st December
2017 were deemed to be independent, apart from Beverley
Stewart, who retired at the conclusion of the AGM on 5th May
2017 and who was not deemed to be independent according
to the Code due to the length of her service.
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 (‘AGM’). At the
forthcoming AGM on 18th May 2018, Tony Giddings and
Mark Lawrence will retire and offer themselves for re-election.
Peter Maskell and Trevor Mitchell are standing for election,
having been appointed as Directors since the last AGM.
Mark Lawrence and Mike Crowder have signed service agreements
which take into account best practice and contain a notice period
47
of 12 months from either party. Trevor Mitchell has signed a
fixed-term service agreement for one year until 31st January 2019.
All Non-Executive Directors have letters of appointment
specifying their roles, responsibilities and required time
commitment to the Board.
Prior to his appointment as Chairman, Iain McCusker
disclosed his significant commitments to the Board. These
commitments, and all Directors’ biographies, are provided
on page 43.
Board diversity
The Board recognises the benefits of Board diversity,
including, but not limited to, the appropriate mix of skills,
experience, gender, age, ethnicity, background and
personality. The Board endorses a balance of diversity and
experience to promote Board effectiveness, whilst taking into
account the appropriate financial, managerial and industry
skills which are relevant to the calibre of a Director of TClarke.
The Board stipulates that new appointments to the Board will
be based on merit and suitability to the role, whilst also giving
due consideration to diversity. Non-Executive Directors should
have the ability to fulfil the requisite time commitment.
Board meetings
The composition of the Board is designed to ensure effective
management, control and direction of the Group.
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.
Matters reserved for the Board include:
• Consideration and approval of the Group’s strategy, budgets,
structure and financing requirements.
• Consideration and approval of the Group’s annual and half-yearly
reports and financial statements.
• Consideration and approval of interim and final dividends.
• Consideration and approval of the Group’s trading statements.
• Ensuring the maintenance of a sound system of internal controls
and risk management.
• Conducting a robust assessment of the principal risks facing the
Company, and setting risk appetite.
• Changes to the structure, size and composition of the Board
recommended by the Nomination Committee.
• Establishing committees of the Board and determining their
terms of reference.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 48
Statement of compliance continued
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 Officer 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
Nomination Committees.
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 monthly Board and sub-committee
meetings is set out below:
Number of meetings attended
Board
(Maximum 14)
Audit
(Maximum 5)
Nomination
(Maximum 3)
Remuneration
(Maximum 6)
Iain McCusker
Tony Giddings
Beverley Stewart1
Mike Robson
Mark Lawrence
Martin Walton
Mike Crowder
14
11
5
14
14
14
13
1 Retired 5th May 2017
–
5
1
5
–
–
–
3
3
0
3
–
–
–
6
5
4
6
–
–
–
Board committees
The Board has delegated certain responsibilities to the
Audit Committee, Remuneration Committee and Nomination
Committee, which report directly to the Board. The terms of
reference of each committee are available in the Investors
section of the Company’s website.
Audit Committee
Mike Robson chairs the Audit Committee and Tony Giddings
and Peter Maskell are also members of the Committee. The
Board is satisfied that Mike Robson has the requisite recent
and relevant financial experience to chair the Audit
Committee. The Audit Committee report is set out on pages
51 to 54.
The roles and responsibilities of the Audit Committee
include:
• Monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the
Company’s financial performance, reviewing significant financial
reporting issues and judgements contained therein.
• Reviewing the Company’s internal controls and risk management
systems and reviewing the need for an internal audit function on
an annual basis.
• Making recommendations to the Board, to be put to
shareholders, in relation to the appointment of external auditors
and their remuneration and terms of engagement.
• Reviewing and approving the audit plan and ensuring it is
consistent with the scope of audit engagement.
• Reviewing the independence of the external auditors and
reviewing the effectiveness of the audit process.
• Reviewing the extent of non-audit services provided by the
external auditors.
• Reviewing the Company’s whistleblowing and anti-bribery
procedures.
Nomination Committee
Iain McCusker chairs the Nomination Committee and Mike
Robson, Tony Giddings and Peter Maskell are also members of
the Committee. The Nomination Committee report is set out
on page 55.
The roles and responsibilities of the Nomination
Committee include:
• Regularly reviewing the structure, size and composition
(including the skills, knowledge, experience and diversity) of the
Board and making recommendations to the Board with regard to
any changes.
• Evaluating the balance of skills, experience, independence
and knowledge on the Board and preparing or approving
a description of the role and capabilities required for a
particular appointment.
• Responsibility for identifying and nominating, for the approval
of the Board, candidates to fill Board vacancies as and when
they arise.
• Satisfying itself with regard to succession planning for Directors
and other senior executives, taking into account the challenges
and opportunities facing the Company and the skills and
expertise needed on the Board in the future.
• Making recommendations to the Board concerning membership
of the Audit and Remuneration Committees.
• Reviewing annually the time required from Non-Executive
Directors.
TClarke Annual Report and Financial Statements 2017 49
Remuneration Committee
Tony Giddings chairs the Remuneration Committee and Iain
McCusker, Mike Robson and Peter Maskell are also members
of the Committee. The Directors’ remuneration report is set
out on pages 56 to 71.
The role and responsibilities of the Remuneration
Committee include:
• Determining the service contracts and base salary levels for
the Executive Directors and other senior management.
• Setting remuneration policy for all Executive Directors and
the Company’s Chairman, taking into account relevant legal
and regulatory requirements, the provision of the Code and
associated guidance.
• Approving the design of, and determining targets for, any
performance-related pay schemes operated by the Company and
approving the total annual payments made under such schemes.
• Determining the policy for, and scope of, pension arrangements
for each Executive Director and other designated senior executives.
• Reviewing the design of all share incentive plans for approval by
the Board and shareholders.
• Agreeing the policy for authorising claims for expenses from
the Directors.
Group Management Board
The Group Management Board comprises the Executive
Directors and other key members of the Group’s senior
management team, including representatives of the regional
businesses. The role of the Group Management Board is to
coordinate and direct the efforts of the four 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 & 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.
The Non-Executive Directors meet with members of 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 regional offices in
order to acquaint themselves with the regional businesses and
their senior management and also visit project sites to see
work being undertaken at first hand.
Performance evaluation
The effectiveness of the contribution and level of commitment
of each Director to fulfil 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 Officer, undertakes the task of annual
evaluation of performance and commitment of individual
Board members by conducting individual interviews. The
evaluation of the Board as a whole, and its committees, is
also undertaken on an annual basis. New Directors receive
a formal induction, overseen by the Chairman in conjunction
with the Company Secretary. Training is available for all
Directors as and when necessary. The Senior Independent
Director, in conjunction with the other independent Non-
Executive Directors, undertakes the annual appraisal of
the Chairman.
The Board conducted an internal appraisal of its own
performance, led by the Chairman in conjunction with the
Nomination Committee, covering the composition, procedures
and effectiveness of the Board and its committees. The Board
members are of the opinion that the Board and its committees
operate effectively. Performance is regularly monitored to
ensure ongoing obligations are adequately met and the Board
regularly considers methods for continuous improvements.
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.
Relationship with shareholders
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 the year-end
and half-year 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. All such meetings are reported at
Board meetings. In addition, the Chairman is available to meet
with major shareholders periodically to discuss Board
governance and strategy.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 50
Statement of compliance continued
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, including 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.
In accordance with the Code, the Board confirms that, for
the year ended 31st December 2017, it has carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency or liquidity. The principal risks
identified and the controls and mitigating actions in place
are described on pages 32 to 35.
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. Furthermore, the Company’s risk appetite
is discussed and considered when making key decisions.
The Board reviews the Company’s risk register and monitors
risk management procedures as a regular agenda item 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. Given the importance
of an effective risk management process, the Company
engaged external advisers to assist with further developing
the Company’s risk management procedures in 2017.
At its meeting on 21st March 2018, the Board carried out the
annual internal controls and risk management assessment of
the year ended 31st December 2017 by considering
documentation from the Audit Committee and reviewing the
need for an internal audit function. Further details concerning
the Audit Committee’s review of internal controls and risk
management processes is included in the Audit Committee
report on pages 51 to 54. Currently there is no formal internal
audit function, this role being covered through regular site
visits conducted by quality control and Group finance
personnel. As noted in the Audit Committee report, the
creation of an internal audit function to augment existing
procedures will be kept under review.
Fair, balanced and understandable assessment
In relation to compliance with the Code, the Board has
given consideration as to whether or not the Annual Report
and Financial Statements, taken as a whole, is fair, balanced
and understandable and concluded that this is the case.
A statement to this effect is included in the Directors’
Responsibilities Statement on page 75. The preparation of
this document is co-ordinated by the Finance team and the
Company Secretary with Group-wide input and support from
other areas of the business. Comprehensive reviews have
been undertaken at regular intervals throughout the process
by senior management and other contributing personnel
within the Group.
The Directors’ responsibilities for preparing the financial
statements and supporting assumptions that the
Company is a going concern are set out on page 75.
Long-term viability statement (‘LTVS’)
In relation to compliance with the Code, the Board has
assessed the prospects of the Company, taking into account
the Company’s current position and principal risks. The LTVS
and supporting assumptions are set out on page 36.
David Lanchester
Company Secretary
27th March 2018
TClarke Annual Report and Financial Statements 2017 Audit Committee report
51
Further information concerning the activities of the Audit
Committee during the year are set out on the following pages.
Mike Robson
Chair of the Audit Committee
27th March 2018
Mike Robson
Chair of the Audit Committee
The Audit Committee supports the Board by providing detailed
scrutiny over the integrity and relevance of the Group’s
financial reporting, monitoring the appropriateness of the
Group’s internal control and risk management systems and
overseeing the external audit process.
The Audit Committee has continued to follow a programme
of meetings which are timed to coincide with key events in
the financial calendar. As a Committee, we are committed to
discharging our responsibilities effectively and constructively
challenge the information we receive. Over the past year,
the regular reports the Audit Committee has received from
management and the external auditors have been timely and
well presented, which has enabled the Committee to discharge
its responsibilities effectively. Where necessary, we request
additional detailed information so that we may better assess
certain issues, and the risks and opportunities presented.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 52
Audit Committee report continued
Membership of the Audit Committee
The members of the Committee during the year were Mike
Robson (Chair), Tony Giddings and, until her retirement
effective 5th May 2017, Beverley Stewart. Peter Maskell also
joined the Committee on his appointment as a Director on
1st January 2018. Biographies of the current members of the
Audit Committee are included on page 43.
Governance
The Committee members are all independent Non-Executive
Directors. The Board is satisfied that Mike Robson has the
requisite recent and relevant financial experience to chair the
Audit Committee. The Committee routinely meets four times a
year, and additionally as required, to review or discuss other
significant matters.
The Company Secretary also attends the meetings and, when
requested, the Finance Director, the Chief Executive Officer
and the external auditor also attend parts of the meetings.
The terms of reference of the Committee are available on the
Company’s website under the Investor section – Corporate
Governance. The terms of reference were reviewed in 2017
and amended to bring them in line with the UK Governance
Code and the FRC Guidance on Audit Committees.
Matters considered by the Audit Committee
The Audit Committee met on five occasions during the year
ended 31st December 2017. The principal matters discussed
at the meetings are set out below.
Principal matters considered
March 2017
• Draft Annual Report and Financial Statements for the year ended
31st December 2016, including significant judgements and
disclosures therein.
• Audit representation letter.
• Annual assessment of internal controls and risk management.
• Review of risk register and mitigating actions.
• A report on internal control and mitigating the risk of fraud.
• Finance Director’s report on going concern and viability
statement.
• Finance Director’s report on goodwill impairment.
• Consideration of the reappointment of external auditors.
• Independence of external auditors.
July 2017
• Progress report on internal control recommendations.
• Draft half-year report and financial statements for the six months
ended 30th June 2017, including significant judgements and
disclosures therein.
October 2017
• Progress report on internal control recommendations.
• Consideration of the need for an internal audit function.
• Review of policy on non-audit services.
• Review of risk register.
November 2017
• Audit plan presented by the auditors.
• Governance and independence of the external auditors.
December 2017
• Review of accounting policies.
• Review of anti-bribery and corruption and whistleblowing
policies.
• Review of Committee’s terms of reference.
• Review of Committee’s effectiveness.
TClarke Annual Report and Financial Statements 2017 53
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 and action
Matter considered:
Carrying value of
intangible assets
and investments
Action: 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.
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
Action: 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.
Matter considered:
Contract profit and
revenue
recognition
Matter considered:
Pension scheme
accounting
Action: 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:
• discount rates;
• mortality assumptions;
• inflation;
• salary increases; and
• expected return on plan assets.
agreed with management’s recommendation that no
impairment charge should be made but that there
remains a risk of impairment of TClarke Scotland,
TClarke South West and TClarke North West 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 12 to
the financial statements on pages 107 to 109.
Aligned to the review of the carrying value of intangible
assets, the Committee also considered the carrying
value of the subsidiaries in the Parent Company’s
financial statements.
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.
The Committee concurred with management’s
assessment of the contracts and the revenue recognised
at those times.
The Committee reviewed the basis of the valuation,
including the assumptions used, and considered
the sensitivity of the pension scheme valuation to
changes in those key assumptions. Further details of
the valuation, including the key assumptions used,
are disclosed in note 24 to the financial statements on
pages 119 to 123. The Committee also considered the
accounting implications of the Group reorganisation,
further details of which are disclosed in note 29 on page
129.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 54
Audit Committee report continued
Internal controls
In parallel with the Group reorganisation described in note 29,
the opportunity was taken to fully review the Group’s payment
and procurement processes and controls and to improve them
where appropriate, particularly in respect of the segregation
of duties between staff members. The review was undertaken
by an independent party with considerable experience of the
industry and the issues it faces. The Audit Committee has
concluded that our controls are adequate and appropriate to
our business.
Internal audit
Based on representations received from management
concerning the operation of internal controls and risk
management procedures, the Audit Committee has concluded
there is no benefit at present in instigating a formal internal
audit process. This will be kept under review.
The Audit Committee reviews the effectiveness of the
audit process through quality service reviews with
the external auditors post-audit. At the end of the
review process, the Audit Committee decides whether,
given the results of the review, to recommend to
shareholders that the auditors be reappointed.
The last audit tender process was in 2011 when PwC
were initially appointed and they have been the auditors
since. In accordance with the Auditing Practices Board
(APB) Ethical Standard 3, a new audit partner was
put in place following completion of the audit for the
year ended 31st December 2015. However, following
discussions with PwC after the completion of the audit
for the year ended 31st December 2016, it was agreed
that a new audit partner be put in place. The current lead
engagement partner has held the position for one year.
Mike Robson
Chair of the Audit Committee
27th March 2018
Risk management
Assisted by Executive Directors, the Audit Committee has
focused on maintaining and improving the procedures to
identify, manage and mitigate the risks facing the business
and to drill down on selected risks on a rolling basis through
the year.
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 102.
The Committee accepts in principle that certain work of
a non-audit nature is most efficiently undertaken by the
external auditor. The policy on non-audit services provided
by PricewaterhouseCoopers LLP (‘PwC’) is that the Chairman
of the Audit Committee approves all non-audit services and
fees, and any such approval is put to the Audit Committee for
ratification at the next meeting. The auditors’ fees for
non-audit services during the year were £nil (2016: £9,000).
The independence of the external auditors is essential
to the provision of an objective opinion on the true and
fair presentation 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.
TClarke Annual Report and Financial Statements 2017 Nomination Committee report
55
The Committee gives due consideration to diversification
in the make-up of the Board but, due to the size of the
Company, the most important consideration is to achieve an
appropriate mix of skills, knowledge and experience, taking
into account the Company’s Board Diversity policy. Before
any appointment is made by the Board, the Nomination
Committee evaluates the balance of skills, experience,
independence and knowledge on the Board and, in the
light of this evaluation, prepares a description of the role
and capabilities required for a particular appointment.
The performance of individual Directors, the Board, its
committees and the Chairman is reviewed annually. In
2017, in order to evaluate the performance of the Board,
each member of the Board was asked to complete a
detailed questionnaire. The responses to the questionnaire
were summarised and were reviewed and discussed by
the Nomination Committee. Topics covered in the review
included strategy, risk management and the conduct
and effectiveness of Board meetings. Whilst there are
always opportunities for development and improvement,
the Directors have concluded that the Board had
effectively discharged its duties during the year.
Iain McCusker
Chair of the Nomination Committee
27th March 2018
Iain McCusker
Chair of the Nomination Committee
During the year, the Nomination Committee comprised
Iain McCusker (Chair), Tony Giddings, Mike Robson and,
until her retirement effective 5th May 2017, Beverley
Stewart. Peter Maskell also joined the Committee
on his appointment as a Director on 1st January
2018. Biographies of the current members of the
Nomination Committee are included on page 43.
The Nomination Committee met three times during the
year to review the structure, size and composition of the
Board, undertake a Board evaluation process and to consider
succession planning for Directors and other senior executives.
The Committee also considered a candidate, Peter Maskell,
to replace Beverley Stewart as a Non-Executive Director
and, following a thorough interview process, the Committee
recommended the appointment of Peter Maskell as a
Non-Executive Director. As the Nomination Committee was
presented with such a suitable candidate for interview, it was
felt that an external search consultancy firm was not required.
Following the departure of Martin Walton, the Finance
Director, the Committee met and considered the process for
his replacement. The Committee recommended to the Board
to appoint Trevor Mitchell as an interim Finance Director for
one year in order to give the Committee time to recruit a long-
term replacement. Trevor Mitchell was known to the Board for
his work in assisting the Company in simplifying the structure
and improving the Group’s financial controls and procedures.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 56
Directors’ remuneration report
targets based on measures aligned with our long-term
strategy. The overarching remuneration framework for
Executive Directors consists of base salary, pension, benefits,
annual bonus and a single long-term incentive plan (LTIP).
Pay is subject to recovery and withholding provisions and
share ownership guidelines apply – features intended to
enhance the alignment of interest between Executive
Directors and shareholders and to contribute to an
appropriate level of risk mitigation. The Committee continues
to believe this framework is effective and remains aligned
with TClarke’s strategy.
Performance and reward for 2017
Our 2017 annual bonus was subject to underlying profit
before tax targets alongside a scorecard of strategic
objectives closely aligned with the KPIs of the business.
Underlying profit before tax increased by 5% to £6.5m (2016:
£6.2m) and the performance of the Executive Directors in
executing against the strategic annual bonus objectives set
for them at the start of 2017 was robust. This resulted in a
payment between the target and stretch performance levels
for each of the financial and strategic elements. As agreed by
the Committee at the beginning of 2017, the bonus payable
would be adjusted to take account of any material recovery
of misappropriated funds relating to the fraud discovered at
one of our subsidiary companies in 2016 (for which the
Committee determined last year to scale back and withhold
the element of the bonus based on financial performance by
two-thirds). £1.17m of funds has been recovered to date
(less costs) and this was taken into account in arriving at the
overall award level. Overall the level of performance achieved
resulted in 83% of maximum bonus being payable. The
Committee believes this is a fair outcome, reflecting strong
Group and individual performance in 2017. The Committee
also intends to similarly adjust any bonus payable for 2018
should further misappropriated funds be recovered as part of
the strategic assessment.
Earnings per share growth over the three-year period to
31st December 2017 was 295%. This was above the stretch
vesting condition for the LTIP award granted in 2015 and, as a
result, the award vested in full.
Implementation of the remuneration policy for 2018
The key highlights of how we intend to apply the
remuneration policy for 2018 are:
• Base salaries – the Executive Directors’ salaries were
increased by 3% effective 1st January 2018 which is
broadly in line with the average increase across the wider
workforce. As part of the review undertaken, the
Committee continues to believe that the Chief Executive’s
salary is not representative of his overall responsibility and
is significantly behind market for a company of this size
and complexity. However, as previously, the Chief Executive
declined a higher increase to his base salary and therefore
his increase is in line with his fellow Executive Directors.
Tony Giddings
Chair of the Remuneration Committee
Annual statement by the Chair of the
Remuneration Committee
Dear Shareholders,
On behalf of the Board, I am pleased to present the
remuneration report for the year to 31st December 2017.
The report comprises:
• The Directors’ Remuneration Policy, which was approved at
the 2017 AGM and is included for information only, as it is
unchanged.
• The Annual Report on Remuneration, which sets out how
the remuneration policy was implemented in the financial
year ending 31st December 2017 and which together with
this introductory statement, is subject to an advisory
shareholder vote at the 2018 AGM.
The primary objective of the Remuneration Policy is to
promote the long-term success of the Company. In working
towards the fulfilment of this objective, our current
remuneration structure is intended to be simple and
transparent, and to contribute to the building of a sustainable
performance culture. Our policy ensures that performance-
related components will form a significant proportion of the
overall remuneration package, with maximum rewards earned
only through the achievement of challenging performance
TClarke Annual Report and Financial Statements 2017 57
• Variable pay – annual bonus maximum will be 150% of
salary and an LTIP award will be made in May 2018 at up
to 150% of salary.
• Performance measures – will continue to be focused on
simple and transparent measures. For the annual bonus,
underlying profit before tax will apply for two-thirds of the
opportunity and key strategic objectives aligned with the
Group’s KPIs will apply for the remaining one-third of
bonus. For the LTIP, stretching earnings per share targets
will be set for financial year 2020.
Board changes
We announced in February that our Group Finance Director,
Martin Walton, was stepping down from the Board and that
he would be leaving the business. Martin stepped down from
the Board on 2nd February 2018. Trevor Mitchell was
appointed to the Board on 1st February 2018 as Group
Finance Director. Trevor’s salary on joining the Board was set
at £224,500 and the rest of his package will be fully in line
with our approved policy.
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 proud of the support we have received in the
past from our shareholders, with over 99% approval of the
Directors’ Remuneration Policy, the Directors’ remuneration
report and the amendment to the Equity Incentive Plan
received last year at the 2017 AGM. We hope that we will
continue to receive your support at the forthcoming AGM
in 2018.
Tony Giddings
Chair of the Remuneration Committee
27th March 2018
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017
58
Directors’ Remuneration Policy
This part of the Directors’ remuneration report sets out the
Directors’ Remuneration Policy for the Company which was
approved by shareholders at the 2017 AGM. The policy came
into effect on 5th May 2017 and is next due to be put to
shareholders for approval at the 2020 AGM. There have been
no changes and it is shown for information and to provide
context to the 2017 remuneration report. Some slight
amendments have been made so that the report can be
appropriately read in the context of the 2018 financial year
(for example, the reward scenario charts have been updated).
The original policy can be found in the 2016 Annual Report,
which can be found on our website.
How the Executive Directors’ remuneration policy
relates to the wider workforce
The Committee does not directly consult with employees
regarding the remuneration of Directors. However, the pay
and conditions elsewhere in the Company are considered
when designing the policy for Executive Directors and
continue to be considered in relation to implementation of
the policy. The Committee regularly monitors pay trends
across the workforce and salary increases will ordinarily
be (in percentage of salary terms) in line with those of the
wider workforce.
The remuneration policy described here provides an overview
of the structure that operates for the most senior executives
in the Company. Employees below executive level have a
lower proportion of their total remuneration made up of
incentive-based remuneration, with pay driven by market
comparators and the impact of the role in question. Long-term
incentives are reserved for those judged as having the
greatest potential to influence the Group’s strategic direction,
earnings growth and share price performance.
How shareholders’ views are taken into account
The Committee seeks to engage with its major shareholders
when any significant changes to the remuneration policy
are proposed. The Committee also considers shareholder
feedback received in relation to the Directors’ remuneration
report and at the AGM each year, and this, plus any additional
feedback received from time to time, is considered as part
of the Committee’s annual review of remuneration policy. The
Committee also closely monitors developments in institutional
investors’ best practice expectations.
Policy overview
The primary objective of the remuneration policy is to
promote the long-term success of the Company. In working
towards the fulfilment of this objective, the Committee takes
into account a number of factors when formulating the
remuneration policy for the Executive Directors, including
the following:
• the need to provide a remuneration structure that is
sufficiently competitive to attract, retain and motivate
Executive Directors of an appropriate calibre to deliver
long-term, sustainable growth of the business;
• the alignment of interests between executives and
shareholders through share ownership and appropriate
recovery and withholding provisions;
internal levels of pay and employment conditions across
the Group as a whole;
•
• the principles and recommendations set out in the UK
Corporate Governance Code and the views of institutional
shareholders and their representative bodies; and
• periodic external comparisons of market trends and
practices in similar companies taking into account of their
size and complexity.
Our remuneration structure is intended to be simple and
transparent, and to contribute to the building of a sustainable
performance culture. Our policy ensures that performance-
related components will form a significant proportion of the
overall remuneration package, with maximum total potential
rewards earned only through the achievement of challenging
performance targets based on measures selected to promote
the long-term success of the Company.
The main elements of the remuneration package for Executive
Directors are a base salary, benefits and pension provision
and, subject to stretching performance conditions, an annual
bonus plan and shares awarded under a long-term incentive
plan (‘LTIP’). The Committee has determined that this
structure will provide an appropriate balance between fixed
and performance-related pay elements. The Committee will
continue to review the remuneration policy to ensure it takes
due account of remuneration best practice and that it remains
aligned with shareholders’ interests.
TClarke Annual Report and Financial Statements 2017 59
Summary Director policy table
The table below summarises the remuneration policy for Directors, as effective from the Company’s 2017 AGM:
Element of remuneration: Salary
Purpose and link to strategy
• To provide competitive fixed remuneration to attract and retain
Executive Directors of superior calibre in order to deliver growth
for the business
Maximum
• There is no prescribed maximum annual basic salary or salary
increase. Details of the current salary levels are set out in the
Annual Report on Remuneration on page 70
Operation
• Normally reviewed annually with changes typically effective
1st January
• Paid in cash on a monthly basis; pensionable
• Comparison against companies with similar characteristics are
taken into account in review
• Internal reference points, the responsibilities of the individual role,
progression within the role and individual performance are also
taken into account
Element of remuneration: Benefits
Purpose and link to strategy
• To promote recruitment and retention
• To provide a market consistent benefits package
Operation
• Benefits may include a combination of car or car allowance, private
medical insurance and life assurance
• Executive Directors will be eligible for any other benefits which are
introduced for the wider workforce on broadly similar terms
• Relocation or travel allowances may be offered if considered
appropriate and reasonable by the Committee
• Any reasonable business-related expenses (including tax thereon)
can be reimbursed if determined to be a taxable benefit
• Executive Directors are also eligible to participate in any all-
employee share plans operated by the Company, in line with
prevailing HMRC guidelines (where relevant), on the same basis as
for other eligible employees
Element of remuneration: Pension
Purpose and link to strategy
• Provide competitive retirement benefits
Operation
• Defined benefit or defined contribution scheme (or cash
alternative)
• 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
• Any salary increase (in percentage of salary terms) will ordinarily
be up to the general increase for the broader employee population;
however, a higher increase may be awarded to recognise, for
example, an increase in the scale, scope or responsibility of the
role and/or to take account of relevant market movements
• Where an Executive Director’s salary is set below market levels
at appointment, a series of increases may be given (in addition
to the factors listed above) in order to achieve the desired salary
positioning, subject to satisfactory individual performance
Performance targets
• None, although the overall performance of the individual is
considered as part of the salary review process
Maximum
• There is no maximum limit but the Committee reviews the cost of
the benefits provision on a regular basis to ensure that it remains
appropriate
• Participation in the all-employee share plans is subject to the limits
set out by HRMC
Performance targets
• Not applicable
Maximum
• Defined contribution or cash allowance or combination of the two
up to 10% of salary
• Current employees who are existing members of the Company’s
defined benefit scheme may be entitled to continue to accrue
benefits under these arrangements rather than participating
in the defined contribution (or cash equivalent) arrangements.
The maximum pension on retirement at age 65 is 1/60th of final
pensionable salary for service before March 2010, and 1/80th
of revalued pensionable salary for service thereafter. A salary
supplement may be provided in order to compensate the individual
up to the value of benefits lost as a results of HMRC limits
Performance targets
• Not applicable
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 60
Directors’ Remuneration Policy continued
Element of remuneration: Bonus
Purpose and link to strategy
• Incentivise annual achievement of performance targets relating to
Maximum
• 150% of salary per annum
the Company’s KPIs
• Maximum bonus only payable for achieving demanding targets
Operation
• Normally payable in cash
• Non-pensionable
• Levels of award are determined by the Committee after the year
end based on performance against the targets set at the start of
the year
• All bonus payments are at the ultimate discretion of the Committee
and the Committee retains an overriding discretion to ensure that
overall bonus payments reflect its view of corporate performance
during the year
Element of remuneration: Long-Term Incentive Plan
Performance targets
• Group financial measures (e.g. profit-related measures) will apply
for the majority of the bonus
• If used, personal or strategic objectives will be applied for the
minority of the bonus
• Measures and objectives will be determined over a one-year
performance period
Purpose and link to strategy
• Aligned to delivery of strategy and long-term value creation
Maximum
• Annual awards of no more than 150% of salary
• Align Executive Directors’ interests with those of shareholders
• To promote retention
Performance targets
• Performance normally measured over three years
Operation
• LTIP awards take the form of conditional rights or nil, nominal cost
or market value options and are normally granted annually
• Awards vest after no less than three years subject to the
achievement of pre-set performance criteria and continued
employment
• The Committee reviews the quantum of awards annually and
monitors the continuing suitability of the performance measures
• The Committee may determine at grant that an amount (in cash
or shares) equivalent to the dividends paid or payable on vested
shares up to the vesting date may become payable; any amount
payable may assume the reinvestment of dividends over the
vesting period
• Awards currently vest based on performance against stretching
earnings per share (‘EPS’) targets set and assessed by the
Committee. However, different financial, strategic or share price-
based measures may be set for future award cycles as appropriate
to reflect the strategic priorities of the business at that time
• Notwithstanding the performance outcome, the Remuneration
Committee retains the discretion to adjust the vesting outcome
upwards or downwards to reflect the underlying performance of
the Company over the three-year period
• A maximum of 25% vests at threshold, increasing to 100% vesting
at maximum on a straight-line basis
• Withholding and recovery provisions may apply in the event of a
material misstatement, error in calculation of award/performance
or gross misconduct
Element of remuneration: Share ownership guidelines
Purpose and link to strategy
• To increase alignment between Executives and shareholders
Maximum
• Not applicable
Operation
• Executive Directors are required to build and maintain a
Performance targets
• Not applicable
shareholding of 30,000 shares through the retention of vested
share awards or through open market purchases
• Only wholly owned shares will count towards the guideline
TClarke Annual Report and Financial Statements 2017 61
Element of remuneration: Non-Executive Director
Purpose and link to strategy
• To provide competitive fees to attract and retain high-calibre
Maximum
• There is no prescribed maximum fee or fee increase
Non-Executive Directors
• To reflect the time commitment and responsibilities of the role
Operation
• The Chairman’s fee is set by the Board on the recommendation
of the Remuneration Committee. The Non-Executive Directors’
fees are set by the Board on the recommendation of the Executive
Directors. No Director takes part in discussions relating to their
own remuneration
• Non-Executives may be paid additional fees for chairing one of the
major Board committees or for holding the Senior Independent
Director position
• The fees are set taking into account the time commitment and
responsibilities of the role
• In exceptional circumstances, if there is a temporary yet material
increase in the time commitments for Non-Executive Directors,
the Board may pay extra fees to recognise the additional workload
• Fees are normally paid monthly in cash and are normally reviewed
annually
• Directors can be reimbursed for any reasonable business-related
expenses (including the tax thereon if determined to be a taxable
benefit
Notes:
1 The choice of the performance metrics applicable to the 2018 annual
bonus scheme reflects the Committee’s belief that any incentive
compensation should be appropriately challenging and tied to both the
delivery of targets relating to key financial measure, profit, and which
support the Company’s strategic objectives through individual and/or
strategic performance measures intended to ensure that Executive
Directors are incentivised to deliver across a range of objectives for
which they are accountable. The Committee has retained some flexibility
on the specific measures which will be used over the life of the policy to
ensure that any measures are fully aligned with the strategic imperatives
prevailing at the time they are set.
2 The performance condition applicable to the 2018 LTIP awards is
earnings per share growth. EPS was selected by the Remuneration
Committee on the basis that it is aligned with the delivery of long-term
returns to shareholders and it is the Group’s key financial metrics. The
Committee has retained flexibility on the measures which will be used for
future award cycles to ensure that the measures are fully aligned with
the strategy prevailing at the time the awards are granted.
Notwithstanding this, the Committee would seek to consult with major
shareholders in advance of any material change to the choice of the LTIP
performance measures.
• Any increase will be guided by changes in market rates, time
commitments and responsibility levels as well as by increases for
the broader employee population
Performance targets
• Not applicable
3 The Committee operates the annual bonus, LTIP and all employee share
plans in accordance with the relevant plan rules and, where appropriate,
the Listing Rules and HMRC legislation. The Committee, consistent with
market practice, retains discretion over a number of areas relating to the
operation and administration of the plans. These include, for example,
the timing of awards and setting performance criteria each year, dealing
with leavers, discretion to retrospectively amend performance targets
in exceptional circumstances (providing the new targets are no less
challenging than originally envisaged) and in respect of share awards,
to adjust the number of shares subject to an award in the event of a
variation in the share capital of the Company.
4 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.
5 Consistent with HMRC legislation, the HMRC all-employee share plans
do not have performance conditions.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 62
Directors’ Remuneration Policy continued
Remuneration scenarios for Executive Directors
The charts below show how the composition of the Executive
Directors’ remuneration packages vary under the policy at three
performance levels (minimum (i.e. fixed pay only), target and
maximum).
Salary would be provided at such a level as required to attract
the most appropriate candidate and may be set initially at a
below mid-market level on the basis that it may progress
towards the mid-market level once expertise and performance
has been proven and sustained.
Group Chief Executive
Fixed pay
100%
Target
57%
Maximum
34%
14%
29%
33%
£447
£786
33%
£1,332
0
200
400
600
800
1,000
1,200
1,400
£000s
Group Managing Director
Fixed pay
100%
Target
58%
28%
14%
Maximum
34%
33%
33%
£405
£695
£1,178
0
200
400
600
800
1,000
1,200
1,400
£000s
Group Finance Director
Fixed pay
100%
Target
50%
33%
17%
Maximum
28%
36%
36%
£250
£502
£923
0
200
400
600
800
1,000
1,200
1,400
Fixed pay
Annual bonus
LTIP
£000s
The charts above are based on:
• salary levels effective 1st January 2018 (or on appointment
to the Board if later);
• the value of benefits received in 2017 (as per the Directors’
remuneration table) and the projected level for the new
Group Finance Director;
• the value of pension contribution received in 2017 (as per
the Directors’ remuneration table);
• a 150% of salary maximum annual bonus (with the
on-target level assuming 50% of maximum); and
• a 150% of salary LTIP award (with target assumed to be
25% of the maximum). No share price appreciation or
dividend assumptions in respect of the LTIP awards have
been assumed.
Approach to recruitment and promotions
The remuneration package for a new Executive Director would
be set in accordance with the terms of the prevailing approved
remuneration policy at the time of appointment and take into
account the skills and experience of the individual, the market
rate for a candidate of that experience and the importance of
securing the relevant individual.
The maximum level of variable pay which may be awarded to
new Executive Directors will be in line with the policy set
above. In addition to this, the Committee may make buyout
awards in the form of additional cash and/or share-based
elements to replace remuneration forfeited by an executive as
a result of leaving his or her previous employer. It will, where
possible, ensure that these awards are consistent with awards
forfeited in terms of vesting periods and expected value.
The Committee may apply different performance measures,
performance periods and/or vesting periods for initial awards
made following appointment under the annual bonus and/or
long-term incentive arrangements, subject to the rules of the
scheme, if it determines that the circumstances of the
recruitment merit such alteration. LTIP awards can be made
shortly following an appointment (assuming the Company is
not in a close period).
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 original terms.
For external and internal appointments, the Committee may
agree that the Company will meet certain relocation and/or
incidental expenses as appropriate.
The fee structure for Non-Executive Director appointments will
be based on the Non-Executive Director fee policy as set out
in the policy table.
Service contracts and approach to leavers
The Company’s policy is for Executive Directors to have
service contracts which may be terminated with no more than
12 months’ notice from either party. The Executive Directors’
service contracts are available for inspection by shareholders
at the Company’s registered office.
No Executive Director has the benefit of provisions in
their service contract for the payment of pre-determined
compensation in the event of termination of employment. It is
the Committee’s policy that the service contracts of Executive
Directors will provide for termination of employment by
giving notice or by making a payment of an amount equal to
basic salary in lieu of the notice period. It is the Committee’s
policy that no Executive Director should be entitled to a
notice period or payment on termination of employment in
excess of the levels set out in his or her service contract.
Incidental expenses may also be payable, if appropriate.
TClarke Annual Report and Financial Statements 2017
63
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. In certain 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 at
the normal vesting date, subject to the satisfaction of the
relevant performance conditions at that time and reduced
pro-rata to reflect the proportion of the vesting period actually
served. However, under the plan rules, the Remuneration
Committee has discretion to determine that awards vest at
cessation of employment and/or to disapply the time pro-
rating requirement if it considers it appropriate to do so.
In relation to a termination of employment, the Committee
may make payments in relation to any statutory entitlements
or payments to settle compromise claims as necessary. The
Committee also retains the discretion to reimburse reasonable
legal expenses incurred in relation to a termination of
employment and to meet any transitional costs if deemed
necessary. Payment may also be made in respect of
accrued benefits, including untaken holiday entitlement.
There is no provision for additional compensation on a
change of control. In the event of a change of control,
the LTIP awards will normally vest on (or shortly before)
the change of control subject to the satisfaction of the
relevant performance conditions at that time and, unless
the Committee determines otherwise, reduced pro-rata
to reflect the proportion of the vesting period served.
Outstanding awards under any all employee share plans
will vest in accordance with the relevant scheme rules.
Bonuses may become payable, subject to performance
and, unless the Committee determines otherwise, a pro-
rata reduction to reflect the curtailed performance period.
External appointments
The Board allows Executive Directors to accept external
Non-Executive Director positions provided the appointment is
compatible with their duties as Executive Directors. The
Executive Directors may retain fees paid for these services.
Any appointment will be subject to approval by the Board.
Non-Executive Directors
The Chairman and Non-Executive Directors’ terms are set out
in letters of appointment. The letters of appointment of the
Non-Executive Directors are available for inspection at the
Company’s registered office during normal business hours.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 64
Annual Report on Remuneration
Single total figure remuneration (audited)
The table below reports the total remuneration receivable in respect of qualifying services by each Director during the year:
Year ended 31st December 2017
Executive:
Mark Lawrence
Mike Crowder
Martin Walton1
Non-Executive:
Iain McCusker
Beverley Stewart2
Tony Giddings
Mike Robson
Total salary
and fees
£
Taxable
benefits
£
Annual
bonus
£
Long-term
incentives
£
Pension-
related
benefits
£
Total
£
293,000
250,000
218,000
60,167
18,958
45,500
45,500
23,825
28,463
22,215
363,174
309,863
75,000
69,894
120,978
870,871
69,894
119,141
777,361
–
45,880
361,095
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,167
18,958
45,500
45,500
1 Martin Walton resigned from the Board on 2nd February 2018. His termination payment was £319,500, which includes the £75,000 bonus payment.
Full details will be disclosed in the 2018 Annual Report.
2 Beverley Stewart retired from the Board on 5th May 2017.
Year ended 31st December 2016
Executive:
Mark Lawrence
Mike Crowder
Martin Walton
Danny Robson1
Non-Executive:
Iain McCusker
Beverley Stewart
Tony Giddings
Mike Robson
Total salary
and fees
£
Taxable
benefits
£
Annual
bonus
£
Long-term
incentives
£
279,000
238,000
207,500
51,875
51,000
45,500
45,500
45,500
23,449
27,986
21,923
5,722
–
–
–
–
189,720
161,840
141,100
–
–
–
–
–
–
–
–
–
–
–
–
–
Pension-
related
benefits
£
Total
£
97,140
589,309
93,885
521,711
43,888
414,411
–
–
–
–
–
57,597
51,000
45,500
45,500
45,500
1 Danny Robson stepped down from the Board on 21st March 2016. He also received £104,000 as payment in lieu of notice for six months’ base salary with
effect from 1st April 2016. No pension contribution was paid for that period.
TClarke Annual Report and Financial Statements 2017 65
The figures in the single total figure remuneration table are derived from the following:
Total salary and fees
The amount of salary and fees received in the year.
Taxable benefits
The taxable value of benefits received in the year. These are a car or car allowance and private medical insurance.
Annual bonus
The 2017 annual bonus was subject to underlying profit before tax targets (two thirds of bonus) alongside a
scorecard of strategic objectives closely aligned with the KPIs of the business (one third of bonus).
The underlying profit before tax targets were as follows: threshold of £5.5m (25% payable), target of £6.05m
(50% payable) and stretch of £7.65m (100% payable). Actual performance was £6.5m which resulted in 63% of
maximum for this element being payable. This element of the bonus was adjusted upwards by 33% (to 84% of
maximum) to reflect the recovery of £1.17m of the misappropriated funds relating to the fraud discovered at one
of our subsidiary companies in 2016 (£700k on a net of costs basis) – last year two-thirds of the financial element
of the bonus had been scaled back and withheld in light of the non-recurring costs incurred as a result of the
fraud; for Mark Lawrence this adjustment resulted in an additional payment for 2017 of £61,384 (2016: bonus of
£186,930 withheld) and for Mike Crowder of £52,363 (2016: bonus of £159,460 withheld) (no adjustment was made
to Martin Walton’s bonus further to his stepping down from the Board on 2nd February 2018). Performance against
strategic objectives was strong and resulted in 80% of maximum for this element being payable.
Overall this resulted in a bonus of 83% of the maximum (124% of salary) for Mark Lawrence and Mike Crowder.
Martin Walton was paid a bonus of £75,000 for 2017 as part of his termination payment.
The value of LTIP awards that vest in respect of a performance period that is completed by the end of the relevant
financial year. For 2017 this includes the 2015 LTIP awards which will vest in full on 29th April 2018. The value is
based on a share price of 77.66p, which is the average share price for the last quarter of 2017. The performance
conditions are detailed on page 66. EPS growth over the three year period to 31st December 2017 was 295%. The
2014 LTIP awards lapsed, so nothing is disclosed for 2016.
Long-term incentives
Pension-related benefits
Pensions are calculated based on HMRC’s pension input method. Details of accrued pensions can be found on
page 67.
Directors’ interests and Minimum Shareholding Requirement (‘MSR’) (audited)
Directors’ interests in the issued share capital of TClarke plc are set out below. There is a MSR for the Executive Directors
whereby each Executive Director is required to build and maintain a holding of 30,000 shares in TClarke plc. For Non-Executive
Directors, the MSR requirement is 2,000 shares in TClarke plc as defined in the Company’s Articles of Association.
The beneficial interests of Directors in the Ordinary share capital of TClarke plc at 31st December 2017 and 31st December
2016 were:
At 31st
December 2017
At 31st
December 2016
10p Ordinary shares
10p Ordinary shares
Outstanding
conditional
share awards2
Outstanding
conditional
options2
Outstanding
options held
under SAYE
MSR achieved at
31st December
2017
Mark Lawrence
Mike Crowder
Martin Walton
Iain McCusker
Beverley Stewart1
Tony Giddings
Mike Robson
41,273
33,273
31,273
2,000
21,000
2,000
2,000
39,607
31,607
29,607
2,000
21,000
2,000
2,000
265,000
250,000
235,000
30,000
30,000
30,000
10,322
10,322
10,322
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
1 Beverley Stewart retired from the Board on 5th May 2017 and held 21,000 shares as at that date.
2 The outstanding conditional share awards and outstanding conditional options are subject to performance conditions.
There have been no changes to Directors’ interests since 31st December 2017 other than the lapsing of Martin Walton’s share
awards and options on his resignation from the Board on 2nd February 2018.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 66
Annual Report on Remuneration continued
The Directors’ interests over shares as a result of their participation in the TClarke Equity Incentive Plan (‘EIP’) are as follows:
Award
date
01/01/2017
Number
Granted
Lapsed
31/12/2017
Number
Exercise
price
Earliest
date of
exercise
Date of
expiry
Mark Lawrence
Conditional shares
29/04/2014
Conditional shares
29/04/2015
Conditional shares
20/04/2016
85,000
90,000
60,000
–
–
–
Conditional shares
08/05/2017
–
115,000
Conditional options
20/04/2016
30,000
Mike Crowder
Conditional shares
29/04/2014
Conditional shares
29/04/2015
Conditional shares
20/04/2016
85,000
90,000
60,000
–
–
–
–
Conditional shares
08/05/2017
–
100,000
Conditional options
20/04/2016
30,000
Martin Walton
Conditional shares
29/04/2014
Conditional shares
29/04/2015
Conditional shares
20/04/2016
85,000
90,000
60,000
–
–
–
–
Conditional shares
08/05/2017
–
85,000
Conditional options
20/04/2016
30,000
–
85,000
–
–
–
–
–
–
–
–
90,000
60,000
– 29/04/2018 29/04/2025
– 20/04/2019 20/04/2026
115,000
– 08/05/2020 08/05/2027
30,000
88.5p 20/04/2019 20/04/2026
85,000
–
–
–
–
–
–
–
–
90,000
60,000
– 29/04/2018 29/04/2025
– 20/04/2019 20/04/2026
100,000
– 08/05/2020 08/05/2027
30,000
88.5p 20/04/2019 20/04/2026
85,000
–
–
–
–
–
–
–
–
90,000
60,000
85,000
– 29/04/2018 29/04/2025
– 20/04/2019 20/04/2026
– 08/05/2020 08/05/2027
30,000
88.5p 20/04/2019 20/04/2026
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 RPI1
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%
1 For the year 2014, the base point from which performance was measured was based on basic EPS for the year preceding the date of grant. For awards
from 2015 onwards, the base point is based on average underlying EPS for the three years ending with the year preceding date of grant.
Following his resignation from the Board on 2nd February 2018, the outstanding EIP awards in the name of Martin Walton
lapsed on that date under the rules of the EIP.
TClarke Annual Report and Financial Statements 2017 67
The Directors’ interests in the TClarke Savings Related Share Option Scheme (‘SAYE Scheme’) are as follows:
Award
date
01/01/2017
Number
Granted
Lapsed
Exercised1
31/12/2017
Number
Exercise
price
Earliest
date of
exercise
Date of
expiry
Mark Lawrence 11/10/2013
08/10/2015
Mike Crowder
11/10/2013
08/10/2015
Martin Walton
11/10/2013
08/10/2015
1,666
10,322
1,666
10,322
1,666
10,322
1 Options exercised on 31st March 2017.
–
–
–
–
–
–
–
–
–
–
–
–
1,666
–
54.00p 01/01/2017 30/06/2017
–
10,322
69.75p 01/12/2018 31/05/2019
1,666
–
54.00p 01/01/2017 30/06/2017
–
10,322
69.75p 01/12/2018 31/05/2019
1,666
–
54.00p 01/01/2017 30/06/2017
–
10,322
69.75p 01/12/2018 31/05/2019
The market price of a 10p Ordinary share on 29th December 2017 (being the last day of trading of 2017) was 81.38p and
the range during the year ended 31st December 2017 was 59.25p to 93.25p.
Following his resignation from the Board on 2nd February 2018, the outstanding SAYE award in the name of Martin Walton
lapsed on that date under the rules of the SAYE.
External appointments
Mark Lawrence and Mike Crowder do not hold any external appointments. Trevor Mitchell is a Director of It’s Purely
Financial Limited.
Pension scheme (audited)
Details of the accrued pension benefits that the Executive Directors would be entitled to on leaving service are as follows:
Total
pension
accrued at
31.12.16
£ p.a.
67,813
69,256
21,493
Increase
in accrued
pension
(including
inflation)
£ p.a.
Increase
in accrued
pension
(excluding
inflation)
£ p.a.
Total
pension
accrued at
31.12.17
£ p.a.
Transfer
value of
accrued
pension at
31.12.16
£
Increase
in transfer
value less
Director’s
contributions
£
Transfer
value of
accrued
pension at
31.12.17
£
9,218
8,997
3,774
7,184
6,920
3,129
77,031
1,356,253
120,978
1,540,614
78,254
1,385,125
119,141
1,565,074
25,266
429,858
45,880
505,329
Mark Lawrence
Mike Crowder
Martin Walton
Inflationary increases were assumed to be 3% per annum during 2017 in line with increases in the Consumer Price Index during
the year.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 68
Annual Report on Remuneration continued
Performance graph (audited)
The graph below shows the total shareholder return that would have been obtained over the past nine years by investing £100
in shares of TClarke plc on 31st December 2008 and £100 in a notional investment in the FTSE All-Share Index and the FTSE
All-Share Construction & 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-Share Construction & 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.
Shareholder return 2009–2017
250
200
150
100
50
0
December
2008
December
2009
December
2010
December
2011
December
2012
December
2013
December
2014
December
2015
December
2016
December
2017
FTSE All-Share
FTSE All-Share Construction & Materials Index
TClarke plc
Total remuneration (audited)
The total remuneration figures for the Chief Executive during each of the last nine 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
(£000s)
Annual bonus (%)
LTIP vesting (%)
20091
231
0%
0%
2010
234
0%
0%
2011
245
0%
0%
2012
266
0%
0%
2013
308
9%
0%
2014
300
0%
0%
2015
436
24%
0%
2016
567
32%
0%
2017
871
69%
100%
1 Pat Stanborough held the position of CEO in 2009.
TClarke Annual Report and Financial Statements 2017 69
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 2016 and 31st December
2017, 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.
2017
£k
2016
£k
%
change
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
293.0
45.2
23.8
2
279.0
44.1s
23.5
2
5.0%
2.5%
1.3%
0%
363.2
189.7
91.5%
UK employee average
1.67
1.66
0.6%
Average number of UK
employees
1,348
1,331
Relative importance of spend on pay
The following table shows the Group’s total spend on pay
relative to dividends and total operating expenses. Total
operating expenses comprise cost of sales and administrative
expenses before amortisation of intangible assets and
non-recurring costs.
Staff costs
Dividends
2017
£m
70.3
1.4
2016
£m
67.1
1.3
%
change
4.8%
7.7%
Total operating expenses
304.0
271.7
11.9%
Service contracts and letters of appointment
Mark Lawrence and Mike Crowder have 12-month notice
periods from the Company (and 12 months from the Executive
Director) in accordance with their service agreements. Trevor
Mitchell has signed a fixed-term service agreement for one
year until 31st January 2019.
Non-Executive Directors have letters of appointment which
include initial terms of three years.
• Tony Giddings (Chair)
• Beverley Stewart (retired 5th May 2017)
• Mike Robson
• Iain McCusker
Biographical information on the Committee members and
details of attendance at the Remuneration Committee’s
meetings during the year are set out on pages 43 and 48
respectively.
The Remuneration Committee has access to independent
advice where appropriate. New Bridge Street (‘NBS’)
(a trading name of Aon Hewitt Ltd, an Aon plc company) was
appointed by the Committee in 2016 to provide independent
advice on remuneration matters.
Representatives from NBS attend Committee meetings on
invitation and provide advice to the Committee Chairman
outside of meetings as necessary. In 2017, NBS provided
specific advice to the Committee in respect of its review of
the Company’s remuneration policy for Directors. NBS also
provided advice in relation to the operation of the Company
share schemes. Fees are charged on a cost incurred basis
and for advice to the Committee totalled £12,600 in the
year ended 31st December 2017. NBS is a member of the
Remuneration Consultants Group and operates voluntarily
under the Group’s code which sets out the scope and conduct
of the role of executive remuneration consultants when
advising UK listed companies. NBS does not undertake
any other work for the Company, and the Committee is
satisfied that the advice provided by NBS remains objective
and independent.
The Committee also receives input from the Chief Executive
and advice from the Company Secretary. No individuals are
present when their own remuneration is being discussed.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 70
Annual Report on Remuneration continued
Statement of voting at Annual General Meeting
The Company remains committed to ongoing shareholder dialogue and takes a keen interest in voting outcomes. The following
table sets out voting outcomes in respect of the resolutions relating to approving Directors’ remuneration matters at the
Company’s AGM on 5th May 2017:
Resolution
Votes for/
discretionary
% of
vote
Votes
against
% of
vote
Votes
withheld
Approval of Directors’ Remuneration Policy
11,224,216
99.55%
50,564
0.43%
38,800
Approval of Directors’ remuneration report
11,230,066
99.60%
44,807
0.38%
38,707
Approval of amendments to the Equity Incentive Plan
11,235,989
99.55%
51,263
0.44%
26,328
Implementation of the remuneration policy for the year ending 31st December 2018
A summary of how the Directors’ Remuneration Policy will be applied during the year ending 31st December 2018 is set out below.
Basic salary
Increases for 2018 are shown below. The Executive Directors’ salaries were increased by 3% effective 1st January 2018.
Director
Mark Lawrence
Mike Crowder
Trevor Mitchell1
Martin Walton2
2018
2017
£301,800
£293,000
£257,500
£250,000
£224,500
N/A
£224,500
£218,000
%
increase
3%
3%
N/A
3%
1 Trevor Mitchell was appointed a Director on 1st February 2018.
2 Martin Walton resigned as a Director on 2nd February 2018.
Pension arrangements
The Company operated a defined benefit pension and death benefits scheme of which Mark Lawrence and Mike Crowder are
members. The defined benefits scheme is closed to new members. The life assurance benefit is four time pensionable salary.
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.
Trevor Mitchell will not receive any pension from the Company.
Annual bonus
The maximum bonus potential for the year ending 31st December 2018 is 150% 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
(two-thirds of overall bonus) and strategic targets (one third of overall bonus) 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.
The measures have been selected to reflect a range of key financial and operational goals which support the Company’s
strategic objectives. The respective targets have not been disclosed as they are considered by the Board to be commercially
sensitive. However, retrospective disclosure of the targets and performance against them will be provided in the remuneration
report for the year ending 31st December 2018 provided that they do not remain commercially sensitive at that time.
The Executive Directors’ performance will be assessed individually by the Committee against the measures and targets, relying
on audited information where appropriate, and having regard to the value which has been created for shareholders.
TClarke Annual Report and Financial Statements 2017 71
Long-term incentives
Consistent with past awards, LTIP awards that will be granted
in 2018 will vest subject to continued employment with the
Group and satisfaction of the following performance conditions
over a three-year period ending on 31st December 2020.
Annual growth in EPS
above RPI1
Less than 3%
3%
Between 3% and 10%
Above 10%
Proportion of award vesting
Nil
25%
Between 25% and 100%
on a straight-line basis
100%
1 Base point from which performance is measured is based on average
underlying EPS for the three years ended 31st December 2017.
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, which includes an increase of 3% effective 1st January
2018. The Chairman’s fee was further reviewed and the fee
was found to be significantly below market comparisons for
similar roles in companies of a similar size and complexity.
The fee has therefore been increased by 10%, in addition
to the 3% increase awarded to the other Non-Executive
Directors, in order to move it towards a level that better
reflects the time commitment associated with the role.
Non-
Executive
Directors
2018
2017
increase
%
Iain McCusker
£63,300
£56,000
Peter Maskell
£46,900
N/A
Tony Giddings
£46,900
£45,500
Mike Robson
£46,900
£45,500
13%
N/A
3%
3%
By order of the Board
Tony Giddings
Chair of the Remuneration Committee
27th March 2018
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 72
Directors’ report
The Directors’ report should be read in conjunction with
the Strategic report on pages 4 to 41 and the Corporate
Governance report on pages 46 to 71, both of which form
part of this Directors’ report. The Directors’ report comprises
sections of the Annual Report incorporated by reference as
set out below which, taken together, contain the information
to be included in the Annual Report, where applicable, under
Listing Rule 9.8.4.
Going concern
Board membership
Dividends
Directors’ long-term incentives
Corporate Governance report
Future developments of the business of
the Group
Page 93
Pages 42 and 43
Page 40
Pages 56 to 71
Pages 46 to 71
Pages 11 to 25
Employee equality, diversity and involvement
Pages 30 and 31
Carbon emissions
Information to the independent auditor
Dividend waiver
Financial risk management
Subsidiaries
Page 28
Page 75
Page 94
Pages 124 to 127
Pages 129 and 130
Directors
The following Directors served during the year ended
31st December 2017 and as at the date of this report,
except as indicated:
Name
Appointment
Iain McCusker
Chairman
Tony Giddings
Senior Independent Non-Executive Director
Mike Robson
Non-Executive Director
Mark Lawrence
Group Chief Executive Officer
Mike Crowder
Group Managing Director
Martin Walton
Group Finance Director
(resigned 2nd February 2018)
Beverley Stewart
Non-Executive Director
(retired 5th May 2017)
Peter Maskell
Trevor Mitchell
Non-Executive Director
(appointed 1st January 2018)
Group Finance Director
(appointed 1st February 2018)
Brief biographies of current serving Directors, indicating their
experience and qualifications, can be found on page 43.
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 (‘AGM’). At the forthcoming AGM
on 18th May 2018, Tony Giddings and Mark Lawrence will retire
and offer themselves for re-election and Peter Maskell and
Trevor Mitchell will offer themselves for election, having been
appointed as Directors since the last AGM.
Powers of Directors
The powers of the Directors are determined by the Company’s
Articles of Association, the Companies Act 2006 and the
directions given by the Company by resolutions passed in
general meetings. The Directors are authorised by the Articles
of Association to issue and allot Ordinary shares, to disapply
statutory pre-emption rights and to make market purchases
of the Company’s shares. The Directors currently have
shareholder approval for the issue of Ordinary share capital
up to a maximum amount of £1,394,318 and for the buyback
of Ordinary shares up to a maximum aggregate of 10%
of the issued Ordinary share capital. The Directors will be
seeking to renew their authorities at the forthcoming Annual
General Meeting.
Share capital
The Company’s share capital consists of Ordinary shares
with a nominal value of 10p each. The issued share capital
as at 31st December 2017 and 27th March 2018 was
£4,182,957.70, consisting of 41,829,577 Ordinary shares of
10p each. The Company’s issued Ordinary shares are fully
paid and rank equally in all respects. There are no restrictions
on the size of a holding nor on the transfer of Ordinary shares
in the Company or on the exercise of voting rights attached
to them, save that:
• certain restrictions may from time to time be imposed by
laws and regulations (for example, insider trading laws
and market requirements relating to close periods); and
• pursuant to the Listing Rules of the Financial Conduct
Authority, whereby certain employees of the Company
require the approval of the Company to deal in the
Company’s shares.
Further details on share capital are shown in note 20 to the
financial statements on pages 114 to 117.
TClarke Annual Report and Financial Statements 2017 Substantial shareholdings
Notifications of the following voting interests in the Company’s
Ordinary share capital had been received by the Company
(in accordance with Chapter 5 of the FCA’s Disclosure and
Transparency Rules) as at 31st December 2017 and 27th
March 2018:
Number
of shares
held
at 31st
December
2017
Number
of shares
held at
27th
March
2018
% of
voting
rights
held
% of
voting
rights
held
Miton Group Plc
7,385,611
17.66
7,385,611
17.66
2,456,595
5.87
2,456,595
5.87
73
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.
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 certain proceedings relating to
the execution of their duties as Directors of the Company.
Hargreaves
Lansdown
Stockbrokers
Barclays
Stockbrokers
Walker Crips
Wealth
Management Ltd
2,198,869
5.26
2,198,869
5.26
2,189,190
5.23
2,189,190
5.23
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.
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.
Political donations
The Group made no political donations during the year ending
31st December 2017 (2016: £nil).
Events after the balance sheet date
There have been no significant events since the balance sheet
date which would have a material effect on the financial
statements.
Company status
So far as the Directors are aware, the Company is not a close
company.
Interactive Investor
1,740,829
4.16
1,740,829
Charles Stanley &
Co. Ltd
1,364,585
3.26
1,364,585
4.16
3.26
The information shown above was correct at the time of
disclosure, however the date received may not have been
within the current financial reporting period. It should also
be noted that these holdings may have changed since the
Company was notified, however, notification of any change
is not required until the next notifiable threshold is crossed.
Significant agreements – change of control
The Directors are not aware of any significant agreements
that take effect, alter or terminate upon a change of control
of the Company following a takeover bid.
The Company has an Equity Incentive Plan (‘EIP’) in place for
Directors and senior management, and an employee share save
scheme in place which is available to all employees. The rules
of the EIP provide that awards made under the EIP may vest
on a change of control of the Company, at the discretion of
the Remuneration Committee. The rules of the 2015 Savings
Related Share Option Scheme provide that in the event of
a change of control, outstanding options may be exchanged
or replaced with similar options on the same terms. Further
details on employee share schemes are disclosed in note 20
to the financial statements on pages 114 to 117.
There are no other 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 74
Directors’ report continued
Auditor
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 Company’s auditor is unaware,
and each such Director has taken all reasonable steps to
make themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware of
that information.
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418(2) of the
Companies Act 2006.
A resolution is to be proposed at the AGM for the
reappointment of PricewaterhouseCoopers LLP as auditor
of the Company at a rate of remuneration to be determined
by the Audit Committee.
Annual General Meeting (‘AGM’)
The AGM of the Company will be held at 200 Aldersgate,
St Pauls, London EC1A 4HD at 10.00am on 18th May 2018.
The Notice convening the AGM, together with details of the
special business to be considered and explanatory notes for
each resolution, is contained in a separate circular sent to
shareholders. It is also available to be viewed on the
Company’s website.
Approved by the Directors and signed on behalf of the Board.
David Lanchester
Company Secretary
27th March 2018
TClarke plc is registered in England No. 119351.
TClarke Annual Report and Financial Statements 2017 75
Statement of Directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have prepared the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and parent
company financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union. 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 parent company and of the profit or loss of the
Group and parent company for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the Group financial
statements and IFRSs as adopted by the European Union
have been followed for the parent company financial
statements, subject to any material departures disclosed
or explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and parent company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
parent company 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 Regulation.
The Directors are also responsible for safeguarding the assets
of the Group and parent company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and
integrity of the parent company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and parent company’s
performance, business model and strategy.
Each of the Directors, whose names and functions are listed
in the Board of Directors section on pages 42 and 43, confirm
that, to the best of their knowledge:
• the parent company financial statements, which have been
prepared in accordance with IFRSs as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and result of the Company;
• the Group financial statements, which have been 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
• the Directors’ Report includes a fair review of the
development and performance of the business and the
position of the Group and parent company, together with
a description of the principal risks and uncertainties that
it faces.
In the case of each Director in office at the date the Directors’
report is approved:
• so far as the Director is aware, there is no relevant audit
information of which the Group and parent company’s
auditors are unaware; and
• they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group
and parent company’s auditors are aware of that
information.
On behalf of the Board
Trevor Mitchell
Finance Director
Iain McCusker
Chairman
27th March 2018
TClarke plc
Registered number: 119351
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 76
Independent auditors’ report to the members of TClarke plc
Report on the audit of the financial statements
• have been properly prepared in accordance with IFRSs as
Materiality
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 2017
and of the group’s profit and the group’s and the parent
company’s cash flows for the year then ended;
adopted by the European Union and, as regards the parent
company’s financial statements, as applied in accordance
with the provisions of the Companies Act 2006; and
• 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.
We have audited the financial statements, included within the
Annual Report and Financial Statements (the ‘Annual Report’),
which comprise: the consolidated and company statements of
financial position as at 31st December 2017; the consolidated
income statement and statement of comprehensive income,
the consolidated and company statements of cash flows, and
the consolidated and company statements of changes in equity
for the year then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under ISAs (UK) are further described in
the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed public interest entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company.
We have provided no non-audit services to the group or the
parent company in the period from 1st January 2017 to
31st December 2017.
Our audit approach
Overview
Audit scope
Key audit
matters
• Overall group materiality: £626,000
(2016: £570,000), based on 0.25% of
average revenue for the last five years.
• Overall parent company materiality:
£484,000 (2016: £513,000), based on
1% of total assets.
• The majority of our audit work was
conducted from the head office in
London, with component audit teams
based in Scotland and the North.
• We met with management from across
all four regions in the course of the audit.
• Revenue recognition and long term
contract accounting in respect of
construction contracts.
• Defined benefit pension plan liabilities.
• Goodwill and intangible assets
impairment assessment.
The scope of our audit
As part of designing our audit, we determined materiality
and assessed 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.
We gained an understanding of the legal and regulatory
framework applicable to the group and the industry in which
it operates, and considered the risk of acts by the group
which were contrary to applicable laws and regulations,
including fraud. We designed audit procedures at group and
significant component level to respond to the risk,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. We focused on laws
and regulations that could give rise to a material
misstatement in the group and parent company financial
statements, including, but not limited to, the Companies Act
2006, the Listing Rules, Pensions legislation and UK tax
legislation. Our tests included, but were not limited to, review
of the financial statement disclosures to underlying
supporting documentation, review of correspondence with
the regulators, review of correspondence with legal advisors,
enquiries of management and review of significant
component auditors’ work. There are inherent limitations in
TClarke Annual Report and Financial Statements 2017 77
the audit procedures described above and the further
removed non-compliance with laws and regulations is from
the events and transactions reflected in the financial
statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to
irregularities, including fraud. As in all of our audits we also
addressed the risk of management override of internal
controls, including testing journals and evaluating whether
there was evidence of bias by the directors that represented
a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters,
and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters. This is not a complete list of all risks identified by
our audit.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition and long term contract accounting in respect
of construction contracts
We selected a sample of contracts to test, based on both
quantitative and qualitative criteria including:
We focused on the revenue and profit recognised on long term
contracts because they result in material balances, involve
judgements and can be complex. IFRS requires 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,
it requires the full loss to be recognised.
The Group generates revenue from long term contracts relating
mainly to mechanical and electrical services.
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, except where this would not be
representative of the stage of completion. Forecast end of life costs
are inherently subjective.
• high levels of revenue recognised in the year;
• low margin or loss-making contracts; and
• contracts with high balance sheet exposure at the year-end.
We obtained an understanding of and evaluated management’s own
process and controls 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. To supplement the detailed substantive
testing described below, we tested the operational effectiveness of
the controls in place.
For our sample of contracts, we focused on the significant
judgements adopted by management in relation to the revenue and
margin recognition, and, in particular, judgements with respect to
the percentage completion, by:
• obtaining an understanding of the contract and its particulars;
• agreeing forecast revenue to signed contracts, signed variations
or other supporting documentation;
• tracing a sample of variations to supporting certifications or
instructions from clients;
• holding discussions with management to understand and
challenge areas of judgement taken;
• where necessary, reviewing third party expert advice obtained
in respect of those judgements;
• 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;
• re-performing the key calculations behind the margin applied,
the profit taken and the stage of completion, as well as balance
sheet exposure;
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 78
Independent auditors’ report to the members of TClarke plc
Report on the audit of the financial statements continued
Key audit matter
How our audit addressed the key audit matter
Defined benefit pension plan liabilities
The Group operates a funded defined benefit scheme for
qualifying employees which was closed to new members after
31st December 2014.
The scheme has assets of £36.6m and post-retirement liabilities
of £60.0m 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 driving the
valuation of the pension obligation, we considered this to be an
area of focus.
• assessing the recoverability of balance sheet items by comparing
to external certification of the value of work performed; and
• agreeing forecast costs to complete to documentary evidence
(such as orders signed with subcontractors or supporting
calculations) and applying industry knowledge and experience to
challenge the completeness of the forecast costs to completion.
Based on all of the evidence obtained in the above procedures, we
are satisfied the revenue and profit recognised by management is
supportable.
We obtained the actuarial valuation at 31st December 2017 and
tested the valuation of the pension liabilities as follows:
• We agreed the discount and inflation rates used in the valuation
of the pension liability to our internally developed benchmarks,
finding these to be within an acceptable range. Our benchmarks
are based on our view of relevant economic indicators;
• We discussed with the Directors the rationale for the discount
rate used and whether the methodology used to derive it was
appropriate; and
• 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.
We did not identify any issues within our testing and were satisfied
the assumptions applied are within an appropriate range.
TClarke Annual Report and Financial Statements 2017 79
Key audit matter
How our audit addressed the key audit matter
Goodwill and intangible assets impairment assessment
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.
We paid particular attention to the South West CGU given
underperformance against budget in recent years, and also noted
the lower headroom in the North West and Scotland CGUs.
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;
• comparing 2017 financial performance to budget and
understanding the drivers of improvement in profitability; and
• performing sensitivity analysis around the key drivers of the
cash flow forecasts, in particular the revenue growth and margin
assumptions; and
• challenging the discount rate used by independently
recalculating the cost of capital, which was consistent with the
discount rate used.
TClarke South West CGU has been loss making historically, the
carrying value of the goodwill is dependent on the CGU’s ability to
make profits from 2018 onwards. We specifically tested:
• the level of secured work by tracing it to supporting orders; and
• the 2018 financial performance to budget and understood the
drivers of improvement in profitability. We noted the value in use
of this business is more sensitive to changes in the assumptions
concerning future revenue growth than assumptions surrounding
the discount rate.
Further, our testing of the South West CGU included 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.
The Directors have built increased profitability into their forecasts
for the CGU and, we challenged them on the realistic impact of
the actions they have taken and intend to take to improve the
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
may result in impairment of the goodwill and investment value
associated with the TClarke South West CGU in future years.
We also examined the disclosures made in the financial statements
and concluded they are appropriate.
Management have also presented sensitivity analysis in respect of
the other CGUs. We examined the disclosures made in the financial
statements (including in respect of the North West and Scotland
CGUs) and compared these to the sensitivity analyses performed by
management. We concluded that the disclosures are appropriate.
We determined that there were no key audit matters applicable to the parent company to communicate in our report.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 80
Independent auditors’ report to the members of TClarke plc
Report on the audit of the financial statements continued
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 structure of the
group and the parent company, the accounting processes and
controls, and the industry in which they operate.
The Group, which is structured into four regional trading
segments, is subdivided into 21 legal entities (of which 12 are
either non-trading or dormant) for the purposes of financial
reporting. We have performed a full scope audit over all nine
active entities.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed at
the reporting units by us, as the Group engagement team, or
component teams from PwC operating under our instruction.
Where the work was performed by component auditors, we
determined the level of involvement we needed to have in the
audit work at those components, in order to be able to
conclude whether sufficient appropriate audit evidence had
been obtained, as a basis for our opinion on the Group
financial statements as a whole.
The majority of our Group audit work, including the audit of
the consolidation, was conducted from the head office in
London as this is where the key accounting processes and
controls are undertaken. We also received reporting from two
component auditor teams from PwC in the UK and attended
the planning and clearance meetings with the component
auditors. Together, the Group and component teams met
with representatives from across all four regions to obtain a
comprehensive understanding from local management of key
matters that had arisen in the year. All work supporting the
parent company audit was performed at the head office
in London.
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 on the
individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Overall materiality
£626,000 (2016: £570,000).
• £484,000 (2016: £513,000).
How we determined it
0.25% of average revenue for the last five years.
• 1% of total assets.
Rationale for benchmark applied
We used revenue as a basis for materiality as
the Group's profit margins have historically been
low, consistent with the industry as a whole,
and therefore revenue is used by the Group as a
key performance indicator. An average measure
was applied to avoid the volatility caused by
fluctuations in revenue over the business cycle.
• We used total assets as a basis for
materiality as the parent company does
not generate external revenue and
we believe that total assets is a more
appropriate benchmark.
For each component in the scope of our group audit,
we allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across
components was between £76,000 and £595,000. Certain
components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audits above
£31,300 (2016: £28,500) as well as misstatements below
those amounts that, in our view, warranted reporting for
qualitative reasons.
TClarke Annual Report and Financial Statements 2017 81
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add
or draw attention to in respect of the directors’ statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the directors’ identification of
any material uncertainties to the group’s and the parent company’s
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial statements.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted,
this statement is not a guarantee as to the group’s and parent
company’s ability to continue as a going concern.
We are required to report if the directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and
Corporate Governance Statement, we also considered whether
the disclosures required by the UK Companies Act 2006 have
been included.
Based on the responsibilities described above and our work
undertaken in the course of the audit, the Companies Act
2006, (CA06), ISAs (UK) and the Listing Rules of the Financial
Conduct Authority (FCA) require us also to report certain
opinions and matters as described below (required by ISAs
(UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic Report and Directors’
Report for the year ended 31st December 2017 is consistent with
the financial statements and has been prepared in accordance
with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course of
the audit, we did not identify any material misstatements in the
Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 47 to 50) about internal controls and risk
management systems in relation to financial reporting processes
and about share capital structures in compliance with rules 7.2.5
and 7.2.6 of the Disclosure Guidance and Transparency Rules
sourcebook of the FCA (“DTR”) is consistent with the financial
statements and has been prepared in accordance with applicable
legal requirements. (CA06)
In light of the knowledge and understanding of the group and
parent company and their environment obtained in the course of
the audit, we did not identify any material misstatements in this
information. (CA06)
In our opinion, based on the work undertaken in the course of
the audit, the information given in the Corporate Governance
Statement (on pages 47 to 50) with respect to the parent
company’s corporate governance code and practices and about
its administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the
DTR. (CA06)
We have nothing to report arising from our responsibility to report
if a corporate governance statement has not been prepared by
the parent company. (CA06)
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 82
Independent auditors’ report to the members of TClarke plc
Report on the audit of the financial statements continued
The directors’ assessment of the prospects of the
group and of the principal risks that would threaten
the solvency or liquidity of the group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 50 of the Annual Report
that they have carried out a robust assessment of the principal
risks facing the group, including those that would threaten its
business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks
and explain how they are being managed or mitigated.
• The directors’ explanation on page 36 of the Annual Report as
to how they have assessed the prospects of the group, over
what period they have done so and why they consider that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the group will be able
to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We have nothing to report having performed a review of
the directors’ statement that they have carried out a robust
assessment of the principal risks facing the group and statement
in relation to the longer-term viability of the group. Our review
was substantially less in scope than an audit and only consisted
of making inquiries and considering the directors’ process
supporting their statements; checking that the statements are
in alignment with the relevant provisions of the UK Corporate
Governance Code (the “Code”); and considering whether the
statements are consistent with the knowledge and understanding
of the group and parent company and their environment obtained
in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to
report when:
• The statement given by the directors, on page 50, that they
consider the Annual Report taken as a whole to be fair, balanced
and understandable, and provides the information necessary
for the members to assess the group’s and parent company’s
position and performance, business model and strategy is
materially inconsistent with our knowledge of the group and
parent company obtained in the course of performing our audit.
• The section of the Annual Report on pages 51 to 54 describing
the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.
• The directors’ statement relating to the parent company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified,
under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006. (CA06)
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors’
responsibilities in respect of the financial statements set out
on page 75, the directors are responsible for the preparation
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and
fair view. The directors are also responsible for such internal
control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the parent 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.
TClarke Annual Report and Financial Statements 2017 83
Other required reporting
Companies Act 2006 exception reporting
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
• certain disclosures of directors’ remuneration specified by
law are not made; 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.
Appointment
Following the recommendation of the audit committee, we
were appointed by the members on 13th May 2011 to audit the
financial statements for the year ended 31st December 2011
and subsequent financial periods. The period of total
uninterrupted engagement is 7 years, covering the years
ended 31st December 2011 to 31st December 2017.
Matthew Mullins
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
27th March 2018
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 84
Consolidated income statement
for the year ended 31st December 2017
Underlying
items
£m
Note
2017
Non-
underlying
items
£m
Total
£m
Underlying
items
£m
2016
Non-
underlying
items
£m
Continuing operations:
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Amortisation of intangible
assets
Non-underlying costs
Other administrative expenses
Total administrative expenses
Profit/(loss) from operations
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) from continuing
operations
Loss for the year from discontinued
operations
Profit/(loss) for the financial year
Earnings/(loss) per share from
continuing operations:
Attributable to owners of TClarke plc
Basic
Diluted
Earnings/(loss) per share:
Attributable to owners of TClarke plc
Basic
Diluted
5
7
7
7
6
6
9
10
11
11
11
11
311.2
(273.0)
38.2
0.1
–
–
–
–
311.2
(273.0)
278.6
(246.2)
38.2
0.1
32.4
0.2
–
–
(31.0)
(31.0)
7.3
–
(0.8)
6.5
(1.3)
5.2
–
5.2
(0.2)
0.8
–
0.6
0.6
–
–
0.6
(0.2)
0.4
–
0.4
(0.2)
0.8
(31.0)
(30.4)
7.9
–
(0.8)
7.1
(1.5)
5.6
–
5.6
–
–
(25.7)
(25.7)
6.9
–
(0.7)
6.2
(1.3)
4.9
–
4.9
Total
£m
278.6
(246.2)
32.4
0.2
(0.2)
(2.3)
(25.7)
(28.2)
4.4
–
(0.7)
3.7
(0.8)
–
–
–
–
(0.2)
(2.3)
–
(2.5)
(2.5)
–
–
(2.5)
0.5
(2.0)
2.9
(0.5)
(2.5)
(0.5)
2.4
12.37p
12.13p
1.07p
1.04p
13.44p
13.17p
11.60p
11.20p
(4.86)p
(4.70)p
6.74p
6.50p
12.37p
12.13p
1.07p
1.04p
13.44p
13.17p
11.60p
11.20p
(6.15)p
(5.95)p
5.45p
5.25p
TClarke Annual Report and Financial Statements 2017 Consolidated statement of
comprehensive income
for the year ended 31st December 2017
Profit for the year
Other comprehensive expense
Items that will not be reclassified to profit or loss
Actuarial loss on defined benefit pension scheme
Other comprehensive expense for the year, net of tax
Total comprehensive income/(expense) for the year
85
2017
£m
5.6
(2.3)
(2.3)
3.3
2016
£m
2.4
(6.3)
(6.3)
(3.9)
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 86
Consolidated statement of financial position
as at 31st December 2017
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 obligations
Total liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT reserve
Revaluation reserve
Retained earnings
Total equity
* See note 17.
Note
12
13
15
16
17
18
21
17
19
25
22
19
24
20
20
2017
£m
25.3
4.9
3.8
34.0
0.5
26.4
67.3
16.7
110.9
144.9
(5.5)
(93.0)
(1.5)
(0.1)
(100.1)
10.8
(5.0)
–
(23.4)
(28.4)
2016*
£m
22.8
3.9
3.3
30.0
0.6
35.9
42.7
12.3
91.5
121.5
(2.5)
(81.0)
(0.2)
(0.1)
(83.8)
7.7
(3.0)
–
(20.6)
(23.6)
(128.5)
(107.4)
16.4
14.1
4.2
3.1
(0.8)
0.5
9.4
16.4
4.2
3.1
(0.8)
0.5
7.1
14.1
The financial statements on pages 84 to 130 were approved by the Board of Directors on 27th March 2018 and were signed on
its behalf by:
I McCusker
Director
M Lawrence
Director
TClarke Annual Report and Financial Statements 2017
Company statement of financial position
as at 31st December 2017
87
Non-current assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Trade and other receivables
Current tax receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Net current assets
Non-current liabilities
Bank loans
Intra-Group loans
Retirement benefit obligations
Total liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT reserve
Retained earnings
Total equity
Note
13
14
15
18
21
19
22
19
24
20
20
2017
£m
–
41.7
–
41.7
0.9
0.4
5.4
6.7
48.4
(1.9)
–
(1.9)
4.8
(5.0)
(25.6)
–
(30.6)
(32.5)
15.9
4.2
3.1
(0.8)
9.4
15.9
2016
£m
–
39.7
–
39.7
0.2
–
13.1
13.3
53.0
(4.3)
(0.3)
(4.6)
8.7
(3.0)
(30.0)
–
(33.0)
(37.6)
15.4
4.2
3.1
(0.6)
8.7
15.4
The Company has taken advantage of the exemption conferred by section 408 of the Companies Act 2006 from presenting its
own income statements. The profit after tax for the year was £2.1 million (2016: £5.0 million).
The financial statements on pages 84 to 130 were approved by the Board of Directors on 27th March 2018 and were signed on
its behalf by:
I McCusker
Director
M Lawrence
Director
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017
88
Consolidated statement of cash flows
for the year ended 31st December 2017
Net cash generated from operating activities
Investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of property, plant and equipment
Receipts on disposal of property, plant and equipment
Net cash generated from investing activities
Financing activities
Drawdown (repayment) of bank borrowing
Equity dividends paid
Acquisition of shares by ESOT
Disposal of shares by ESOT
Repayment of HP and finance lease obligations
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
21
20
20
20
20
21
21
2017
£m
6.8
(1.5)
(1.9)
0.3
(3.1)
2.0
(1.4)
(0.2)
0.2
0.1
0.7
4.4
12.3
16.7
2016
£m
4.0
–
(0.2)
0.5
0.3
(2.0)
(1.3)
(1.5)
1.1
–
(3.7)
0.6
11.7
12.3
TClarke Annual Report and Financial Statements 2017 Company statement of cash flows
for the year ended 31st December 2017
89
Net cash generated from operating activities
Investing activities
Interest received
Investment in subsidiaries
Dividends received from subsidiaries
Net cash generated from investing activities
Financing activities
Repayment of bank borrowing
Equity dividends paid
Movement in ESOT
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
21
20
20
20
21
21
2017
£m
(8.2)
–
(1.5)
1.6
0.1
2.0
(1.4)
(0.2)
0.4
(7.7)
13.1
5.4
2016
£m
8.1
0.1
(7.9)
2.6
(5.2)
(2.0)
(1.3)
(0.6)
(3.9)
(1.0)
14.1
13.1
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 90
Consolidated statement of changes in equity
for the year ended 31st December 2017
At 1st January 2016
Comprehensive expense
Profit for the year
Other comprehensive expense
Actuarial loss on retirement benefit
obligation
Deferred income tax 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
Shares distributed by ESOT
Dividends paid
Total transactions with owners
Transfers
At 31st December 2016
Comprehensive expense
Profit for the year
Other comprehensive expense
Actuarial loss on retirement benefit
obligation
Deferred income tax on actuarial loss
on retirement benefit obligation
Effect of change in tax rate
Total other comprehensive expense
Total comprehensive income
Transactions with owners
Share-based payment credit
Shares acquired by ESOT
Shares distributed by ESOT
Dividends paid
Total transactions with owners
Transfers
Share
capital
£m
4.2
Attributable to owners of the parent
Share
premium
£m
ESOT share
reserve
£m
Revaluation
reserve
£m
Retained
earnings
£m
3.1
(0.4)
0.6
12.1
Total
£m
19.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.9)
0.5
–
(0.4)
–
4.2
3.1
(0.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.1)
0.5
–
–
–
–
–
–
–
–
–
–
–
–
2.4
2.4
(7.3)
(7.3)
1.4
(0.4)
(6.3)
(3.9)
0.1
–
–
(1.3)
(1.2)
0.1
7.1
1.4
(0.4)
(6.3)
(3.9)
0.1
(0.9)
0.5
(1.3)
(1.6)
–
14.1
5.6
5.6
(2.7)
(2.7)
0.5
–
(2.2)
3.4
0.3
–
–
(1.4)
(1.1)
–
9.4
0.5
–
(2.2)
3.4
0.3
(0.2)
0.2
(1.4)
(1.1)
–
16.4
At 31st December 2017
4.2
3.1
(0.8)
0.5
TClarke Annual Report and Financial Statements 2017 Company statement of changes in equity
for the year ended 31st December 2017
91
At 1st January 2016
Comprehensive expense
Profit for the year
Other comprehensive expense
Actuarial loss on retirement benefit obligation
Deferred income tax 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
Loan repaid by ESOT
Dividends paid
Total transactions with owners
At 31st December 2016
Comprehensive expense
Profit for the year
Other comprehensive expense
Actuarial loss on retirement benefit obligation
Deferred income tax on actuarial loss on
retirement benefit obligation
Effect of change in tax rate
Total other comprehensive expense
Total comprehensive income
Transactions with owners
Share-based payment credit
ESOT movements
Dividends paid
Total transactions with owners
At 31st December 2017
Share
capital
£m
4.2
Attributable to owners of the parent
Share
premium
£m
ESOT share
reserve
£m
Retained
earnings
£m
3.1
(0.1)
11.2
Total
£m
18.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.5)
–
(0.5)
4.2
3.1
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
4.2
3.1
(0.8)
5.0
5.0
(7.3)
(7.3)
1.4
(0.4)
(6.3)
(1.3)
0.1
–
(1.3)
(1.2)
8.7
1.4
(0.4)
(6.3)
(1.3)
0.1
(0.5)
(1.3)
(1.7)
15.4
2.1
2.1
–
–
–
–
–
–
–
–
2.1
2.1
–
–
(1.4)
(1.4)
9.4
–
(0.2)
(1.4)
(1.6)
15.9
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 92
Notes to the financial statements
for the year ended 31st December 2017
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 on page 131. The nature of the
Group’s operations and its principal activities are described in
note 5 and in the Strategic report on pages 4 to 41.
The Group is working towards the implementation of IFRS 9
with effect from 1st January 2018. It anticipates that the
classification and measurement basis for its financial assets
and liabilities will be unchanged by adoption of IFRS 9.
The main impact of adopting IFRS 9 is likely to arise from the
implementation of the expected credit loss model. No material
impact on retained earnings at 31st December 2017 or on
profit for future periods is expected.
2 Application of new and revised IFRSs
A New standards, interpretations and amended
standards adopted by the Group
No new standards, amendments or interpretations, effective
for the first time for the financial year beginning on or after
1st January 2017, have had a material impact on the Group
or Company.
B New standards, interpretations and amended
standards in issue but not yet adopted by the Group
A number of new standards and amendments to standards
and interpretations are effective for annual periods beginning
after 1 January 2018, and have not been applied in preparing
these financial statements. None of these is expected to have
a significant effect on the financial statements of the Group or
Company, except the following, set out below:
IFRS 9 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 IAS 39’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.
IFRS 15 Revenue from contracts with customers
IFRS 15, ‘Revenue from contracts with customers’, deals with
revenue recognition and establishes principles for reporting
useful information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers.
The core principle of IFRS 15 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 so that
the customer obtains control of a good or service and thus
has the ability to direct the use and obtain the benefits from
the good or service. Variable consideration is included in the
transaction price if it is highly probable that there will be no
significant reversal of the cumulative revenue recognised
when the uncertainty is resolved. The standard replaces
IAS 18, ‘Revenue’, and IAS 11, ‘Construction contracts’, and
related interpretations. The standard is effective for annual
periods beginning on or after 1st January 2018.
The Group is working towards the implementation of IFRS 15
and has carried out a comprehensive review of existing
contractual arrangements as part of this process. This review
has included a detailed consideration of individual contracts
covering approximately 50% of Group revenue.
As a result of this review the Directors are of the opinion that
there is not likely to be a material impact on revenue, costs
and associated balances as at and during the year ended
31st December 2017, and therefore they do not believe that
a prior year adjustment will be necessary in respect of the
financial statements for the year ending 31st December 2018.
TClarke Annual Report and Financial Statements 2017 93
Going concern
The Group had positive net cash balances at the year end and
has in place a three-year £10 million committed revolving
credit facility, £5 million of which was drawn down, and a
£5 million overdraft facility. For details of the covenants in
place refer to note 22 on page 118.
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 renewed in
January 2017. 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.
Eton Associates Limited (acquired during the year – see
note 28 for further details) had debt facilities comprising a
£300,000 invoice discounting facility, a £75,000 overdraft
facility and various hire purchase and finance lease
agreements, details of which are disclosed in note 25. The
Group is in the process of cancelling Eton Associates Limited’s
banking facilities and absorbing its banking facilities within the
Group’s banking arrangements.
There is no other external debt.
After making enquiries and taking account of reasonably
possible changes in trading performance, the Directors are
satisfied that, at the time of approving the financial
statements, it is appropriate to adopt the going concern basis
in preparing the financial statements of both the Group and
the parent company.
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.
IFRS 16 Leases
IFRS 16 was issued on 13th January 2016 and will become
mandatory for accounting periods beginning on or after 1st
January 2019, with early adoption permitted. IFRS 16 will
replace the current guidance under IAS 17 and related
interpretations. The main feature of IFRS 16 is that lessees
will have to recognise a lease liability reflecting future lease
payments and a ‘right of use asset’ for almost all lease
contracts, whereas at present a distinction is drawn between
finance leases and operating leases depending on whether
substantially all the risk and reward of ownership have been
transferred to the lessee. In future periods, the operating
lease charge would be replaced by a depreciation charge.
The Group is yet to assess the full impact of IFRS 16, and
intends to adopt the new standard no later than the
accounting period beginning 1st January 2019. The Group
intends to apply the transitional arrangements permitted by
IFRS 16 and will not seek to apply the standard to contracts
that were not previously recognised as leases prior to the
adoption of IFRS 16. The Directors will complete their
assessment of the impact of IFRS 16, including the various
options and transitional arrangements available, during the
year ended 31st December 2018.
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 2017 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 94
Notes to the financial statements continued
for the year ended 31st December 2017
3 Accounting policies continued
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, 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. The Trustee of the ESOT has waived its
right to dividends on the shares held in the ESOT.
D Segmental reporting
Operating divisions are reported in a manner consistent
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 F).
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 as other
operating income on a straight-line basis over the term of the
relevant lease.
Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest
rate applicable.
Dividend income 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 (instances of which are rare).
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.
TClarke Annual Report and Financial Statements 2017 95
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 one to ten years.
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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 96
Notes to the financial statements continued
for the year ended 31st December 2017
3 Accounting policies continued
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.
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 P).
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%
Leasehold improvements 10% or life of lease if shorter
Plant, machinery and motor vehicles 10%–25%
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, and subsequently at cost less
provisions for impairment. 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 of the
lease or, if lower, at the present value of the minimum lease
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 classified as current assets and 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 may be 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.
TClarke Annual Report and Financial Statements 2017 97
3 Accounting policies continued
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 extent 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.
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.
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. 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 98
Notes to the financial statements continued
for the year ended 31st December 2017
3 Accounting policies continued
The current service cost of defined benefit retirement benefit
schemes is recognised in ‘employee benefit expense’ in the
income statement, except where included in the cost of an
asset, and reflects the increase in the defined benefit
obligation resulting from service in the current year, benefit
changes, curtailments and settlements. Past service cost is
recognised immediately in the income statement.
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 20.
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-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.
This includes items that are irregular in nature, and also the
amortisation of acquired intangibles, which principally relates
to acquired customer relationships. The Group incurs costs,
which are recognised as an expense in the income statement,
in maintaining these customer relationships. The Group
considers that the exclusion of the amortisation charge on
acquired intangible from underlying performance avoids the
potential double counting of such costs.
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 in note 3F on page 94.
Commercial reviews of all live contracts are undertaken on a
regular basis, with all significant contracts being reviewed on
a monthly basis. 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.
Discontinued operations
The judgement as to whether an activity that has ceased
constitutes a discontinued operation requires an assessment
of whether it forms a separate component of the Group’s
business and represents a separate major line of business or
geographical area of operations that has been disposed of,
has been abandoned or that meets the criteria to be classified
as held for sale.
TClarke Annual Report and Financial Statements 2017 99
4 Significant judgements and sources of
estimation uncertainty continued
Impairment of goodwill and investments
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 12. The estimation of the value in
use is also used to assess the carrying value of investments in
the relevant subsidiaries in the Company’s financial statements.
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 24, 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 24 on pages 122 to 123.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 100
Notes to the financial statements continued
for the year ended 31st December 2017
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 four regional divisions: London
and South East, Central and South West, the North and Scotland, reporting to the Chief Executive Officer, who is the chief
operating decision maker. The measurement basis used to assess the performance of the divisions is underlying profit from
operations, stated before amortisation of intangible assets and non-underlying items. Non-underlying items for each segment
are disclosed on pages 100 and 101 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. Segmential information is based on internal management reporting.
B Segment information – current year
Total revenue
Inter segment revenue
Revenue from external operations
Underlying profit from operations
Amortisation of intangibles
Non-recurring items (see note 7)
Profit from operations
Finance income
Finance costs
Profit before tax
Taxation expense
Profit for the year from continuing
operations
London &
South East
£m
192.3
(14.7)
177.6
8.5
–
0.8
9.3
–
9.3
Central
& South
West
£m
63.1
(0.5)
62.6
(1.8)
–
–
(1.8)
–
(1.8)
North
£m
50.8
(2.8)
48.0
2.4
(0.2)
–
2.2
–
2.2
Scotland
£m
27.3
(4.3)
23.0
0.8
–
–
0.8
–
0.8
Unallocated
and
Eliminations
£m
–
–
–
(2.6)
–
–
(2.6)
(0.8)
(3.4)
(1.5)
Group
£m
333.5
(22.3)
311.2
7.3
(0.2)
0.8
7.9
(0.8)
7.1
(1.5)
5.6
TClarke Annual Report and Financial Statements 2017 101
London &
South East
£m
142.9
–
142.9
3.5
–
(2.3)
1.2
–
(0.8)
0.4
Central &
South West
£m
67.9
(1.1)
66.8
1.0
–
–
1.0
–
–
1.0
North
£m
53.6
(3.4)
50.2
1.8
(0.2)
–
1.6
0.1
–
1.7
Scotland
£m
21.0
(2.3)
18.7
0.6
–
–
0.6
–
–
0.6
Unallocated
and
Eliminations
£m
–
–
–
–
–
–
–
(0.1)
0.1
–
2017
£m
289.4
21.8
311.2
0.1
0.1
Group
£m
285.4
(6.8)
278.6
6.9
(0.2)
(2.3)
4.4
–
(0.7)
3.7
(0.8)
2.9
2016
£m
253.1
25.5
278.6
0.2
0.2
5 Segment information continued
C Segment information – prior year
Total revenue
Inter segment revenue
Revenue from external operations
Underlying profit from operations
Amortisation of intangibles
Non-recurring items (see note 7)
Profit from operations
Finance income
Finance costs
Profit before tax
Taxation expense
Profit for the year from continuing
operations
D Revenue
Total revenue comprises:
Sales revenue:
Construction contracts
Other services
Operating income:
Other operating income
E Information about major customers
Revenue includes £35.4 million (2016: £33.3 million) which arose from sales to a single customer. No other single customer
contributed 10% or more of the Group’s revenue for either 2017 or 2016.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 102
Notes to the financial statements continued
for the year ended 31st December 2017
6 Finance income and finance cost
Finance income:
Interest on bank deposits
Finance costs:
Interest on bank overdrafts and loans
Interest cost in respect of defined benefit pension schemes
Net total of finance income and finance cost
7 Profit from operations
A Operating profit is stated after charging/(crediting):
Amortisation of intangible assets
Non-underlying costs (see B below)
Depreciation of property, plant and equipment
Profit on disposals of property, plant and equipment
Operating lease charges:
Land and buildings
Plant, machinery and vehicles
Project-related raw materials and consumables
Rent receivable
Bad debt expense
Fees payable to the Company’s auditors for the audit of:
The Company and consolidation
Subsidiary companies
Employee benefit expense (see note 8)
The auditors’ fees for non-audit services during the year were £nil (2016: £9,000).
B Non-underlying items:
Misappropriation of funds
Recovery of misappropriated funds
Investigation costs
Acquisition expenses
2017
£m
–
(0.2)
(0.6)
(0.8)
(0.8)
2017
£m
0.2
(0.8)
0.6
–
0.4
1.1
87.6
–
0.2
0.2
0.1
70.3
2017
£m
–
(1.0)
–
0.2
(0.8)
2016
£m
–
(0.1)
(0.6)
(0.7)
(0.7)
2016
£m
0.2
2.3
0.5
(0.1)
0.5
1.3
74.5
–
0.2
0.2
0.1
67.1
2016
£m
1.9
–
0.4
–
2.3
TClarke Annual Report and Financial Statements 2017 103
7 Profit from operations continued
In the second half of the year ended 31st December 2016, the Group uncovered financial irregularities within the accounting
function of a wholly owned subsidiary, DG Robson Mechanical Services Limited (‘DGR’). £2.9 million of cash was misappropriated
over a number of years, of which £1.9 million had been expensed in 2016 and £1.0 million had been charged to the income
statement in previous years within cost of sales and administrative expenses. The 2016 expense was separately disclosed as a
non-recurring item in the financial statements for the year ended 31st December 2016. Results prior to and including 2015 have
not been restated as the impact cumulatively and in each year was not considered to be material.
The Group engaged expert professional advisers to assist in the investigation and recovery of the stolen funds. The costs of the
investigation have also been included and disclosed as non-recurring costs.
The Group reached an out-of-court settlement with a former employee of DGR and related parties in respect of the
misappropriated funds. Under the terms of the settlement agreement, the Company was due to receive aggregate cash
payments of £1.43 million on or before 31st December 2017 (unless the Company agreed to an extension of the final settlement
date) in full and final settlement of all claims by the Company and its subsidiaries against the individual concerned and related
parties. As at 31st December 2017, the Group had received £1.0 million of the settlement amount and was pursuing recovery
of the outstanding balance. No account has been taken of outstanding settlement amounts in these financial statements.
The Group continues to pursue other third parties in order to recover the balance of the misappropriated funds. It is too early
at this stage to estimate the quantum of any further recovery.
Expenses incurred in respect of the acquisition of Eton Associates Limited during the year have been disclosed as a
non-underlying item as acquisitions are irregular events.
8 Employee benefit expense
A Employee benefit expense
Staff costs during the year were as follows:
Wages and salaries
Share awards and options granted to Directors and employees
(see note 20)
Termination costs
Social security costs
Other pension costs
Group
Company
2017
£m
2016
£m
2017
£m
60.7
58.4
0.3
–
6.4
2.9
70.3
0.1
0.3
6.2
2.1
67.1
–
–
–
–
–
–
2016
£m
21.5
0.1
0.1
2.3
0.7
24.7
Of the above employee costs of the Group, £70.3 million (2016: £66.9 million) relates to continuing operations and £nil
(2016: £0.2 million) to discontinued operations. All employee costs of the Company relate to continuing operations.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 104
Notes to the financial statements continued
for the year ended 31st December 2017
8 Employee benefit expense continued
B Monthly average number of employees
Staff (including Directors)
Operatives
Group
Company
2017
Number
2016
Number
2017
Number
2016
Number
417
931
409
902
1,348
1,311
–
–
–
144
239
383
The monthly average number of employees of the Group comprises 1,348 (2016: 1,311) in continuing operations and nil
(2016: nil) in discontinued operations. All Company employees were engaged in continuing operations.
9 Taxation
Taxation expense:
Current tax expense
UK corporation tax payable on profits for the year
Deferred tax expense/(credit)
Arising on:
Origination and reversal of timing differences
Total income tax expense
Reconciliation of tax charge
Profit for the year from continuing operations
Tax at standard UK tax rate of 19.25% (2016: 20%)
Tax effect of:
Permanently disallowed items
Total income tax expense
2017
£m
1.6
1.6
(0.1)
1.5
7.1
1.4
0.1
1.5
2016
£m
0.8
0.8
–
–
0.8
3.7
0.7
0.1
0.8
Income tax credited to other comprehensive income
(0.5)
(1.0)
The main rate of corporation tax was reduced from 21% to 20% on 1st April 2015 and from 20% to 19% on 1st April 2017.
A further reduction in the main rate of corporation tax to 17% from 1st April 2020 had been substantially enacted at
31st December 2017 for the purposes of IAS 12 ‘Income Taxes’.
TClarke Annual Report and Financial Statements 2017 105
10 Discontinued operations
A Description
On 19th November 2015, the Group announced its intention to discontinue its operations in the Cardiff and Bristol areas.
The Group’s activities in these areas ceased and the closure of the Cardiff and Bristol offices was successfully completed by
31st December 2015, with the remaining employees and any outstanding contractual commitments transferring to our expanded
TClarke South West operation. The Group incurred further losses closing out these contractual commitments during 2016 and set
out below.
B Financial performance
Revenue
Cost of sales
Gross loss
Administrative expenses
Loss from operations before taxation
Taxation
Loss for the financial year
C Cash flow information
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net cash outflow
2017
£m
–
–
–
–
–
–
–
2017
£m
–
–
–
–
2016
£m
4.5
(5.1)
(0.6)
–
(0.6)
0.1
(0.5)
2016
£m
(0.6)
–
–
(0.6)
11 Earnings per share
A Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted
average number of Ordinary shares in issue during the year.
Earnings/(loss):
Profit attributable to owners of the Company
Continuing operations
Discontinued operations
Earnings from continuing operations
Weighted average number of Ordinary shares in issue (000s)
Basic underlying earnings per share
2017
£m
2016
£m
5.6
–
5.6
2.9
(0.5)
2.4
41,625
41,613
13.44p
5.45p
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 106
Notes to the financial statements continued
for the year ended 31st December 2017
11 Earnings per share continued
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 20.
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.
Earnings/(loss):
Profit attributable to owners of the Company
Continuing operations
Discontinued operations
Underlying earnings from continuing operations
Weighted average number of Ordinary shares in issue (000s)
Adjustments:
Savings Related Share Option Schemes
Equity Incentive Plan:
Conditional share awards
Options
2017
£m
2016
£m
5.6
–
5.6
2.9
(0.5)
2.4
41,625
41,613
201
649
–
170
854
447
Weighted average number of Ordinary shares for diluted earnings per share (000s)
42,475
43,084
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.
Profit from continuing operations attributable to owners of the Company
Adjustments:
Amortisation of intangible assets
Non-recurring costs (see note 7)
Tax effect of adjustments
Underlying earnings from continuing operations
Weighted average number of Ordinary shares in issue (000s)
Adjustments:
Savings Related Share Option Schemes
Equity Incentive Plan:
Conditional share awards
Options
Weighted average number of Ordinary shares for diluted earnings per share (000s)
Diluted earnings per share
2017
£m
5.6
0.2
(0.8)
0.2
5.2
2016
£m
2.9
0.2
2.3
(0.5)
4.9
41,625
41,613
201
649
–
170
854
447
42,475
12.13p
43,084
11.20p
TClarke Annual Report and Financial Statements 2017 12 Intangible assets
Cost:
At 1st January and 31st December 2016
Additions
At 31st December 2017
Accumulated impairment and amortisation:
At 1st January 2016
Charge for the year
At 31st December 2016
Charge for the year
At 31st December 2017
Net book value:
At 1st January 2016
At 31st December 2016
At 31st December 2017
107
Other
intangible
assets
£m
2.9
–
2.9
(1.9)
(0.2)
(2.1)
(0.2)
(2.3)
1.0
0.8
0.6
Goodwill
£m
24.2
2.7
26.9
(2.2)
–
(2.2)
–
(2.2)
22.0
22.0
24.7
Total
£m
27.1
2.7
29.8
(4.1)
(0.2)
(4.3)
(0.2)
(4.5)
23.0
22.8
25.3
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. Other intangible assets comprise customer relationships arising on acquisitions. Amortisation
of other intangible assets is included in administrative expenses in the income statement.
Goodwill is allocated to cash-generating units as follows:
Cash-generating unit
TClarke London
TClarke Midlands and East
TClarke Scotland
TClarke North West
Eton Associates Limited
TClarke South West
TClarke Leeds
TClarke Newcastle
Operating segment
London & South East
Central & South West
Scotland
North
London & South East
Central & South West
North
North
£m
8.1
4.8
3.0
2.7
2.7
1.3
1.2
0.9
24.7
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 (‘CGUs’) to which the goodwill has been allocated. Each operating division 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 2018 to 2020, which
take into account secured orders, business plans and management actions. The results of the period subsequent to 2020 have
been projected using 2020 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 108
Notes to the financial statements continued
for the year ended 31st December 2017
12 Intangible assets continued
Assumptions
The key assumptions to which the assessment of the recoverable amounts of CGUs are sensitive are the projected revenue and
operating margin to 2020 and beyond, and the discount rate applied. The range of these assumptions applied to the CGUs
within each segment is as follows:
Pre-tax discount rate
Average annual revenue growth 2017–2020 (2016: 2016–2019)
London & South East
Central & South West
North
Scotland
Average operating margins 2017–2020 (2016: 2016–2019)
London & South East
Central & South West
North
Scotland
Average operating margins beyond 2020 (2016: beyond 2019)
London & South East
Central & South West
North
Scotland
2017
11.0%
(1.4%)
2.3%
5.2%
2.9%
2016
12.0%
6.7%
1.3%
4.2%
6.0%
2.5% 2.2%–2.4%
2.3%–2.6% 1.5%–2.0%
2.1%–4.3% 3.4%–3.9%
2.1%–2.2% 2.8%–2.9%
2.5% 2.2%–2.4%
2.4%–2.6% 1.8%–2.1%
2.5%–4.5% 3.3%–4.9%
2.9%
2.2%
Sensitivities
Scotland and North West are considered to be the CGUs most vulnerable to impairment. The key assumptions used in respect of
these CGUs are as follows:
Pre-tax discount rate
Annual revenue growth 2017–2020
Average operating margins 2017–2020
Operating margins beyond 2020
TClarke
Scotland
TClarke
North West
11.0%
2.9%
2.1%
2.2%
11.0%
4.0%
2.2%
2.5%
Annual revenue growth and operating margin assumptions are supported by an analysis of the secured order book and
opportunities identified by the CGUs, with Scotland having secured 83% of its forecast revenue and North West 65% of its
forecast revenue for 2017.
Sensitivity analysis has been applied to the cash flow projections for Scotland and North West. The assumption 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:
Decrease in operating profit
Scotland
North West
38%
35%
South West is forecast to be profitable in 2018 and beyond. Should this not occur, South West may be at risk of impairment.
TClarke Annual Report and Financial Statements 2017 109
12 Intangible assets continued
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 2017, based on these valuations, no increase in the impairment provision was required against the carrying
value of goodwill (2016: £nil).
An assessment of the subsidiary investments using consistent methodology amended for pre-tax cash flows indicates that there
is no requirement for any additional impairment provision.
13 Property, plant and equipment
Group
Cost or valuation:
At 1st January 2016
Additions
Disposals
At 31st December 2016
Additions
Disposals
At 31st December 2017
Accumulated depreciation and impairment:
At 1st January 2016
Charge for the year
Disposals
At 31st December 2016
Charge for the year
Disposals
At 31st December 2017
Net book value:
At 1st January 2016
At 31st December 2016
At 31st December 2017
Freehold
properties
£m
Leasehold
improvements
£m
Plant,
machinery
and
vehicles
£m
3.5
–
(0.3)
3.2
–
(0.4)
2.8
(0.3)
(0.1)
0.1
(0.3)
(0.1)
0.1
(0.3)
3.2
2.9
2.5
0.7
–
–
0.7
1.1
–
1.8
(0.4)
(0.1)
–
(0.5)
(0.1)
–
(0.6)
0.3
0.2
1.2
3.2
0.2
(0.6)
2.6
0.9
(0.2)
3.4
(2.1)
(0.3)
0.6
(1.8)
(0.4)
0.1
(2.1)
1.1
0.8
1.3
Total
£m
7.4
0.2
(1.1)
6.5
2.0
(0.6)
7.9
(2.8)
(0.5)
0.7
(2.6)
(0.6)
0.2
(3.0)
4.6
3.9
4.9
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 arm’s 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. A further external valuation was concluded as at 31st January 2018 which indicated
that the market value of the Group’s property was not significantly different to the book value. The net book value of the
freehold properties on a historic cost basis would have been £1.9 million (2016: £2.3 million).
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 110
Notes to the financial statements continued
for the year ended 31st December 2017
13 Property, plant and equipment continued
The net book value of Group plant, machinery and vehicles includes £0.1 million (2016: £0.1 million) in respect of assets held
under finance leases and hire purchase contracts. Depreciation of £nil (2016: £nil) 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 up to a maximum value of £3.1 million, to secure the future pension obligations of the scheme.
The book and fair value of the properties at 31st December 2017 was £2.5 million (2016: £2.6 million).
Company
Cost or valuation:
At 1st January 2016
Disposals
At 31st December 2016
Additions
Disposals
At 31st December 2017
Accumulated depreciation and impairment:
At 1st January 2016
Charge for the year
Disposals
At 31st December 2016
Charge for the year
Disposals
At 31st December 2017
Net book value:
At 1st January 2016
At 31st December 2016
At 31st December 2017
Leasehold
improvements
£m
Plant,
machinery
and vehicles
£m
0.4
–
0.4
–
(0.4)
–
(0.3)
(0.1)
–
(0.4)
–
0.4
–
0.1
–
–
0.7
(0.7)
–
–
–
–
(0.5)
–
0.5
–
–
–
–
0.2
–
–
Total
£m
1.1
(0.7)
0.4
–
(0.4)
–
(0.8)
(0.1)
0.5
(0.4)
–
0.4
–
0.3
–
–
TClarke Annual Report and Financial Statements 2017 14 Investments
Investments in subsidiaries comprise:
Cost:
At 1st January
Additions
At 31st December
Impairment:
At 1st January
Charge for the year
At 31st December
Net book value:
At 1st January
At 31st December
111
2017
£m
49.3
2.0
51.3
(9.6)
–
(9.6)
39.7
41.7
2016
£m
41.4
7.9
49.3
(9.3)
(0.3)
(9.6)
32.1
39.7
A full list of the Company’s subsidiaries is included in note 30 on pages 129 and 130. An annual impairment review is
undertaken at 31st December each year in conjunction with the goodwill impairment review (see note 12), 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.
15 Deferred taxation
Group
Asset at 1st January 2016
Charged to income
Credited to other comprehensive income
Asset at 31st December 2016
Charged to income
Charged to other comprehensive income
Asset at 31st December 2017
Retirement
benefit
obligation
£m
Accelerated
capital
allowances
£m
Revaluations
£m
(0.1)
–
–
(0.1)
–
–
(0.1)
2.6
(0.1)
1.0
3.5
–
0.5
4.0
(0.1)
0.1
–
–
–
–
–
Other
£m
(0.1)
–
–
(0.1)
0.1
–
–
Total
£m
2.3
–
1.0
3.3
0.1
0.5
3.9
The amount of deferred tax recoverable within one year is insignificant. Certain deferred tax assets and liabilities have been
offset. The deferred tax asset arises in respect of the deficit on the retirement benefit obligation. A deficit reduction plan is in
place to reduce this deficit over a number of years (see note 24). The deferred tax asset will be recovered over time as the
deficit is reduced.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 112
Notes to the financial statements continued
for the year ended 31st December 2017
15 Deferred taxation continued
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 2016
Credited to income
Charged to other comprehensive income
Transferred to subsidiary
Asset at 31st December 2016 and 31st December 2017
16 Inventories
Raw materials and consumables
17 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
2017
£m
(0.2)
4.0
3.8
Retirement
benefit
obligation
£m
2.6
(0.1)
1.0
(3.5)
–
2017
£m
0.5
2017
£m
2016
£m
(0.2)
3.5
3.3
Total
£m
2.6
(0.1)
1.0
(3.5)
–
2016
£m
0.6
2016
£m
255.9
(235.0)
260.3
(226.9)
20.9
33.4
26.4
(5.5)
20.9
35.9
(2.5)
33.4
During the year management reassessed the presentational treatment of certain balance sheet items in respect of the Group’s
construction contract portfolio in order to provide additional clarity on the respective balances and more appropriate disclosure.
This has resulted in certain presentational changes in 2016 as follows: amounts due from customers under construction
contracts (increase of £8.1m), trade and other receivables (increase of £0.9m), amounts due to customers under construction
contracts (decrease of £1.9m), and trade and other payables (increase of £10.9m).
At 31st December 2017, retentions held by customers of the Group for contract work amounted to £16.7 million
(2016: £14.7 million). These amounts are included in trade receivables (see note 18).
Advances received from customers for contract work amounted to £nil (2016: £nil).
TClarke Annual Report and Financial Statements 2017 113
18 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:
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
2017
£m
52.8
(0.5)
52.3
–
1.1
10.6
3.3
67.3
(0.5)
(0.2)
–
(0.2)
(0.5)
30.6
1.8
4.0
4.4
12.0
52.8
0.5
5.5
2.5
3.0
11.5
2016
£m
30.0
(0.5)
29.5
–
0.1
11.0
2.1
42.7
(0.5)
(0.2)
–
0.2
(0.5)
13.9
2.2
2.9
6.9
4.1
30.0
1.6
0.9
0.4
0.7
3.6
2017
£m
–
–
–
0.3
0.6
–
–
0.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2016
£m
–
–
–
0.2
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 relate 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 114
Notes to the financial statements continued
for the year ended 31st December 2017
19 Trade and other payables
Group
Company
Current:
Trade payables
Owed to Group companies
Other taxation and social security
Accruals
Deferred income
Other payables
Non-current:
Owed to Group companies (see note 29)
Other payables
At 31st December
Trade payables payment terms are as follows:
30 days or less
31 to 60 days
Greater than 60 days
2017
£m
53.3
–
8.9
29.4
0.4
1.0
93.0
–
–
–
22.4
18.9
12.0
53.3
2016
£m
46.9
–
6.6
25.4
1.3
0.8
81.0
–
0.1
0.1
18.1
13.6
15.2
46.9
2017
£m
–
1.4
–
–
–
0.5
1.9
25.6
–
25.6
–
–
–
–
2016
£m
–
2.8
1.4
–
–
0.1
4.3
30.0
–
30.0
–
–
–
–
20 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
Retained earnings
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 above
depreciated cost.
Cumulative net gains and losses recognised in the income statement and
the statement of comprehensive income.
TClarke Annual Report and Financial Statements 2017 115
20 Capital and reserves continued
B Share capital and premium
Allotted, called up and fully paid
Number of
shares
Ordinary
shares
£m
Share
premium
£m
At 1st January 2016, 31st December 2016 and 31st December 2017
41,829,577
4.2
3.1
All shares rank equally in respect of shareholder rights.
C Save As You Earn scheme
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:
Number of
options
Grant date
Exercise date
Exercise price
Fair value at
date of grant
2015 SAYE scheme
1,367,537
09/10/2015
01/12/2018
to
31/05/2019
69.75p
1.57p
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 IFRS 2 is £nil for the year ended 31st December 2017
(2016: £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 £200 in respect of the 2015 scheme, 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.
The number of options outstanding during the year were as follows:
At 1st January
Granted
Exercised
Lapsed
At 31st December
2017
Weighted
average
exercise
price (p)
66.45
–
76.64
77.66
80.13
2017
Number
1,904,378
–
(378,653)
(158,188)
1,367,537
2016
Weighted
average
exercise
price (p)
60.53
–
42.00
67.97
66.45
2016
Number
2,891,484
–
(717,397)
(269,709)
1,904,378
The weighted average remaining contractual life of the options at 31st December 2017 was 334 days (2016: 551 days).
On 1st January 2017, 398,933 options granted under the SAYE Scheme became exercisable at an exercise price of 54p
per 10p Ordinary share. Options exercised during the year were satisfied by shares held in treasury by the Employee Share
Ownership Trust.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 116
Notes to the financial statements continued
for the year ended 31st December 2017
20 Capital and reserves continued
D Equity Incentive 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 preceding the date upon
which an award is made, shall not exceed 10% of the Company’s issued share capital at the date of the grant.
At 31st December 2017, 750,000 conditional share awards, 90,000 conditional options and 570,000 conditional matching awards
have been granted under the TClarke Equity Incentive Plan as follows:
Date of grant
Number of awards
Share price at date of grant
Exercise price
Option life
Conditional
shares
Conditional
shares
Conditional
options
Matching
awards
Conditional
shares
29/04/2015
270,000
71.50p
–
3 years
20/04/2016
180,000
88.50p
88.50p
3 years
20/04/2016
90,000
88.50p
–
3 years
20/04/2016
570,000
88.50p
88.50p
3 years
08/05/2017
300,000
90.50p
–
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 underlying EPS above RPI1
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%
1 Based on average underlying EPS for the three years preceding the date of grant, in respect of the awards granted on 29th April 2015 and 20th April 2016,
and on the basic underlying EPS for the year ended 31st December 2016 in respect of the awards granted on 8th May 2017.
Matching awards will vest three years from date of grant conditional on the Group achieving profit targets set at the beginning
of each year.
E Share-based payment expense
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 IFRS 2 is £0.3 million charge for the year
ended 31st December 2017 (2016: £0.1 million).
TClarke Annual Report and Financial Statements 2017 117
20 Capital and reserves continued
F Dividends paid
Final dividend of 2.90p (2016: 2.70p) per Ordinary share proposed and paid during the
year relating to the previous year’s results
Interim dividend of 0.60p (2016: 0.50p) Ordinary share paid during the year
2017
£m
1.2
0.2
1.4
2016
£m
1.1
0.2
1.3
The Directors are proposing a final dividend of 2.9p (2016: 2.70p) per Ordinary share totalling £1.2 million (2016: £1.1 million).
This dividend has not been accrued at the reporting date.
21 Notes to the statement of cash flows
A Reconciliation of operating profit to net cash (outflow)/inflow from operating activities
Profit/(loss) from operations:
Continuing operations
Discontinued operations
Depreciation charges
Profit on sale of property, plant and equipment
Equity-settled share-based payment expense
Amortisation
Investment impairment
Defined benefit pension scheme credit
Operating cash flows before movement in working capital
(Increase)/decrease in inventories
(Increase)/decrease in contract balances
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Corporation tax paid
Interest paid
Net cash generated from operating activities
Group
Company
2017
£m
7.9
–
0.6
–
0.3
0.2
–
(0.5)
8.5
0.1
12.6
(23.1)
9.1
7.2
(0.2)
(0.2)
6.8
2016
£m
4.4
(0.6)
0.5
(0.1)
0.1
0.2
–
(0.7)
3.8
(0.2)
(6.6)
(6.4)
14.1
4.7
(0.5)
(0.2)
4.0
2017
£m
(2.6)
–
–
–
–
–
–
–
(2.6)
–
–
(0.7)
(3.9)
(7.2)
(0.1)
(0.9)
(8.2)
2016
£m
3.9
–
0.1
–
0.1
–
0.3
(0.7)
3.7
–
11.9
13.5
(20.2)
8.9
(0.6)
(0.2)
8.1
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.
Group
Company
Cash and cash equivalents
2017
£m
16.7
2016
£m
12.3
2017
£m
5.4
2016
£m
13.1
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 118
Notes to the financial statements continued
for the year ended 31st December 2017
22 Bank overdrafts and loans
During the year, the Group had in place a £5 million overdraft facility and a £10 million revolving credit facility (‘RCF’), both with
National Westminster Bank plc. Interest is charged at 2.25% above LIBOR on drawn balances under the RCF and 2.25% above
base rate on overdrawn balances. A fee of 0.9% is payable on undrawn balances under the RCF. The RCF includes financial
covenants in respect of interest cover and net leverage ratios which are tested quarterly.
All operating companies within the Group (except for Eton Associates Limited, which was acquired during the year) are included
within the overdraft facility, and cross guarantees and charges have been granted in favour of National Westminster Bank plc.
No value has been attributed to the guarantee contracts in the Company’s financial statements as the amount is considered
to be negligible.
At 31st December 2017, the Group had unused overdraft facilities of £5 million (2016: £5 million) and had £5 million undrawn
committed facilities (2016: £7 million) under the RCF.
The Group was compliant with its obligations under the RCF and the overdraft facility throughout the year.
23 Related party transactions
A Directors’ remuneration
Salaries, fees and other short-term employee benefits
Termination benefits
Share-based payment charge
Post-employment benefits
2017
£m
1.7
–
0.1
0.2
2.0
2016
£m
1.5
0.1
0.1
0.1
1.8
Further disclosures, including details of the highest-paid Director, are included in the Director’s remuneration report on pages 56
to 71.
B Key management remuneration
Compensation payable to key management for employee services is shown below. Following the Group reorganisation in 2017,
key management includes members of the Group Management Board.
Salaries, fees and other short-term employee benefits
Termination benefits
Share-based payment charge
Post-employment benefits
2017
£m
1.1
–
0.1
0.1
1.3
2016
£m
3.0
0.1
0.1
0.4
3.6
TClarke Annual Report and Financial Statements 2017 119
23 Related party transactions continued
C Sales and purchases of goods and services to/from subsidiaries
The amounts due from and to subsidiaries are disclosed in notes 18 and 19 respectively.
TClarke plc was charged £2.4 million (2016: £nil) by TClarke Services Ltd for Group management services and incurred interest
charges of £0.7 million (2016: £nil) on intercompany loans. TClarke plc charged subsidiary companies £nil (2016: £0.7 million)
during the year for insurance services and £nil (2016: £0.2 million) for IT services. Sales to other Group companies of £nil
(2016: £nil) and cost of sales from other Group companies of £nil (2016: £27.6 million) are included in the financial statements
of the Company.
24 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 Group also contributes to an industry-wide, multi-employer defined benefit pension scheme on behalf of certain employees.
The assets of the scheme are held separately from those of the Group in an independently administered fund. The plan exposes
participating employers to actuarial risks associated with the current and former employees of other entities with the result that
there is no consistent and reliable basis for allocating the obligation, plan assets and costs to individuals participating in the
scheme, and the Group does not have access to sufficient information to enable it to use defined benefit accounting. Therefore,
the scheme has been accounted for as a defined contribution scheme. The latest formal actuarial valuation as at 5th April 2015
showed that the scheme had a funding level of 101%.
The total cost charged to income of £2.3 million (2016: £1.3 million) 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. Contribution rates during the year
ended 31st December 2016, expressed as a percentage of pensionable payroll, were as follows:
The most recent triennial actuarial valuation of the scheme, carried out at 31st December 2015 by Mr J Seed, Fellow of the
Institute of Actuaries, showed a deficit of £14.9 million, which represented a funding level of 67%. The valuation was impacted
by the significant fall in bond yields over the period leading up to the date of the valuation and a change in mortality assumptions,
caused by macro-economic factors beyond the Group’s control. As a result, the ongoing cost of funding the scheme has increased
significantly. Following agreement of the valuation, a revised funding and deficit reduction plan has been implemented which
includes making additional contributions and continuing to provide security in the form of a contingent asset over the Group’s
property portfolio up to a combined value of £3.1 million, with the aim of eliminating the deficit by 31st March 2029.
From 1st April 2017, the future service contribution increased from 15.7% to 21.4% of pensionable payroll (including employee
contributions, which, following employee consultation, were increased from 8% to 10% of pensionable payroll) and the deficit
reduction contribution, which was previously set at 13.0% of pensionable payroll, has been set at £1.0 million for the year ending
31st December 2017, rising to £1.25 million for the year ending 31st December 2018 and £1.5 million per annum thereafter.
As part of a Group reorganisation, a subsidiary company, TClarke Services Limited, became the principal employer of the scheme
with effect from 23rd December 2016, and the pension scheme liability and related deferred tax asset were transferred to TClarke
Services Limited at that date. The Company and its subsidiary, TClarke Contracting Limited, have provided a guarantee to the
trustees of the scheme in respect of TClarke Services Limited’s obligations to the pension scheme.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 120
Notes to the financial statements continued
for the year ended 31st December 2017
24 Pension commitments continued
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 consolidated statement of financial position are as follows:
Present value of funded obligations
Fair value of plan assets
Deficit of funded plans
2017
%
2.65
3.10
2.60
3.35
2017
Years
22.0
24.4
23.3
25.8
2016
%
2.60
3.05
2.80
3.30
2016
Years
21.9
24.2
23.1
25.7
2017
£m
60.0
(36.6)
23.4
2016
£m
53.3
(32.7)
20.6
TClarke Annual Report and Financial Statements 2017 121
24 Pension commitments continued
The movement in the defined benefit obligation is as follows:
At 1st January 2016
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 2016
Current service cost
Interest expense
Remeasurements:
Return on plan assets, excluding amounts included in interest expense
Loss from change in financial assumptions
Experience loss
Contributions:
Employers
Employees
Payment from plans:
Benefit payments
At 31st December 2017
Present
value of
obligation
£m
Fair value of
plan assets
£m
43.2
(29.8)
0.9
1.8
2.7
–
9.8
(1.8)
8.0
–
0.4
–
(1.2)
(1.2)
(0.7)
–
–
(0.7)
(1.6)
(0.4)
(1.0)
1.0
Total
£m
13.4
0.9
0.6
1.5
(0.7)
9.8
(1.8)
7.3
(1.6)
–
–
53.3
(32.7)
20.6
1.3
1.5
2.8
–
3.3
1.1
4.4
–
0.6
–
(0.9)
(0.9)
(1.7)
–
–
(1.7)
(1.8)
(0.6)
1.3
0.6
1.9
(1.7)
3.3
1.1
2.7
(1.8)
–
(1.1)
1.1
–
60.0
(36.6)
23.4
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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 122
Notes to the financial statements continued
for the year ended 31st December 2017
24 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:
Quoted
Unquoted
2017
UK quoted
Overseas quoted
Hedge funds
Equities
Fixed interest
corporate bonds
Inflation-linked bonds
Government bonds
Debt instruments
Property
Cash
Insurance annuity
contracts
Other
Total
3.6
11.7
3.1
18.4
1.7
0
4.6
6.3
2.3
–
–
–
27.0
–
–
–
–
–
–
–
–
–
6.2
1.7
1.7
9.6
Total
3.6
11.7
3.1
18.4
1.7
–
4.6
6.3
2.3
6.2
1.7
1.7
36.6
%
Quoted
Unquoted
2016
50%
17%
6%
17%
5%
3.0
7.1
9.6
19.7
5.0
0.8
1.6
7.4
–
–
–
–
27.1
–
–
–
–
–
–
–
–
2.1
1.9
1.6
–
5.6
%
60%
22%
7%
6%
5%
Total
3.0
7.1
9.6
19.7
5.0
0.8
1.6
7.4
2.1
1.9
1.6
–
32.7
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). Multi-asset funds include property investments. The scheme does not directly own
any property assets. 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.
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.
TClarke Annual Report and Financial Statements 2017 123
24 Pension commitments continued
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 22 years.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Inflation assumption
Life expectancy
Change in assumption
Increase in assumption
Decrease in assumption
Impact on defined benefit obligation
0.5%
0.5%
Decrease by 10%
Increase by 6%
Increased by 12%
Decrease by 8%
Increase by one year
in assumption
Decrease by one
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.
25 Lease obligations
A Obligations under finance leases
Amounts payable under finance leases:
Within one year
Within one to two years
Within two to three years
Within three to four years
Less: future finance charges
Present value of lease obligations
Minimum lease payment
Present value of minimum
lease payment
2017
£m
0.1
–
–
–
0.1
–
0.1
2016
£m
0.1
–
–
–
0.1
–
0.1
2017
£m
0.1
–
–
–
0.1
–
0.1
2016
£m
0.1
–
–
–
0.1
–
0.1
The average lease term is three to four years. For the year ended 31st December 2017, the average effective borrowing rate
was 6% (2016: 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.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 124
Notes to the financial statements continued
for the year ended 31st December 2017
25 Lease obligations continued
B 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 second to fifth year inclusive
Company
Within one year
In second to fifth year inclusive
Land and
buildings
2017
£m
Other
operating
leases
2017
£m
0.4
0.1
0.5
0.9
1.5
2.4
Land and
buildings
2017
£m
Other
operating
leases
2017
£m
–
–
–
–
–
–
Land and
buildings
2016
£m
0.4
0.2
0.6
Land and
buildings
2016
£m
0.3
–
0.3
Other
operating
leases
2016
£m
0.9
0.8
1.7
Other
operating
leases
2016
£m
0.3
0.2
0.5
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, guarantees and collateral warranties
under contracting and other arrangements entered into in the normal course of business.
Group’s defined benefit pension
As part of a Group reorganisation, a subsidiary company, TClarke Services Limited, became the principal employer of the
scheme with effect from 23rd December 2016, and the pension scheme liability and related deferred tax asset were transferred
to TClarke Services Limited at that date. The Company and its subsidiary, TClarke Contracting Limited, have provided a
guarantee to the trustees of the scheme in respect of TClarke Services Limited’s obligations to the pension scheme.
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 2016.
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.
TClarke Annual Report and Financial Statements 2017 125
27 Financial instruments continued
The capital structure of the Group at 31st December 2017 and 2016 was as follows:
Cash and cash equivalents
Less total borrowings
Net funds
Total equity
2017
£m
16.7
(5.1)
11.6
16.4
2016
£m
12.3
(3.1)
9.2
14.1
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:
31st December 2017
Carrying value
Contractual cash flows:
Less than one year
One to two years
Two to three years
Three to four years
Total
31st December 2016
Carrying value
Contractual cash flows:
Less than one year
One to two years
Two to three years
Three to four years
Total
1 Trade and other receivables excludes prepayments.
Cash and cash
equivalents
£m
Trade and
other
receivables1
£m
Amounts
due from
customers
under
construction
contracts
£m
Total
£m
16.7
64.0
26.4
107.1
16.7
–
–
–
16.7
12.3
12.3
–
–
–
12.3
59.6
3.8
0.6
–
64.0
40.6
33.7
5.5
1.2
0.2
40.6
26.4
–
–
–
102.7
3.8
0.6
–
26.4
107.1
35.9
88.8
35.9
–
–
–
35.9
81.9
5.5
1.2
0.2
88.8
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 126
Notes to the financial statements continued
for the year ended 31st December 2017
27 Financial instruments continued
Financial liabilities – analysis of maturity dates
At 31st December 2017, the carrying value of the Group’s financial liabilities and maturity profile of the associated contractual
cash flows were as follows:
31st December 2017
Carrying value
Contractual cash flows:
Less than one year
One to two years
Two to three years
Three to four years
Total
31st December 2016
Carrying value
Contractual cash flows:
Less than one year
One to two years
Two to three years
Three to four years
Total
Amounts due
to customers
under
construction
contracts
£m
Trade and
other
payables1
£m
83.7
80.9
2.4
0.4
–
83.7
73.1
71.3
1.3
0.4
0.1
73.1
5.5
5.5
–
–
–
5.5
2.5
2.5
–
–
–
2.5
Obligations
under
finance
leases
£m
0.1
0.1
–
–
–
0.1
0.1
0.1
–
–
–
0.1
Bank
loans2
£m
5.0
0.2
0.2
5.0
–
5.4
3.0
0.3
0.2
0.2
3.0
3.7
Total
£m
93.1
85.5
2.6
5.4
–
93.5
78.7
74.2
1.5
0.6
3.1
79.4
1 Trade and other payables exclude deferred income and other taxation and social security.
2 Details of the Group’s bank facilities are given in note 22 on page 118.
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.
TClarke Annual Report and Financial Statements 2017 127
27 Financial instruments continued
The Group seeks to manage these risks as follows:
Credit risk
Credit risk is the risk that a counterparty 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 creditworthiness 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 2017.
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 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’s facilities were successfully renegotiated in December 2016 and now comprise a £10 million RCF and a £5 million
overdraft facility. The RCF is a committed facility available until 31st March 2020 and is subject to quarterly financial covenant
tests. Management has prepared three-year cash flow projections 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 £0.2 million (2016: £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 £0.2 million (2016: £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 2.25% above base rates. The
interest rate on amounts drawn down under the RCF are fixed at LIBOR plus 2.25% 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 £0.1 million (2016: £0.1 million) per annum.
Details of the Group’s and the Company’s bank facilities are disclosed in note 22. Details of finance lease commitments are
disclosed in note 25.
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 128
Notes to the financial statements continued
for the year ended 31st December 2017
28 Business combinations
On 4th August 2017, the Group acquired 100% of the share capital of Eton Associates Limited (‘Eton’) for an initial cash
consideration of £1.5 million. Additional cash consideration of between £nil and £1.0 million cash is due on agreement of the
completion accounts as at 4th August 2017, dependent on the carrying value of net assets, and further cash consideration of up
to £0.6 million will become payable to the vendors subject to certain earnings targets being met in the two years ending
4th August 2019. The completion accounts had not yet been completed at the date that these financial statements were
approved, and therefore a provisional estimate of the consideration due for the acquisition of Eton has been included in these
financial statements.
Eton is a controls systems specialist offering a variety of building management systems, and specialises in installing and
maintaining sophisticated building controls systems. The acquisition reflects the Group’s strategy to grow and develop its
intelligent buildings services offering to support its core mechanical and electrical contracting business.
The following table summarises the provisional consideration paid for Eton, and the provisional fair value of assets acquired and
liabilities assumed at the acquisition date. The Group has not yet completed its assessment of the fair value of assets acquired
and liabilities assumed, and therefore the amounts included below are provisional.
Consideration at 4 August 2017
Cash
Contingent consideration
Total consideration
Recognised amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Property, plant and equipment
Trade and other receivables
Trade and other payables
Hire purchase and finance lease obligations
Total identifiable net assets
Goodwill
Total
£m
1.5
0.5
2.0
–
0.4
1.5
(2.4)
(0.2)
(0.7)
2.7
2.0
The contingent consideration arrangements are as follows:
• An additional £0.5 million cash consideration will be paid to the vendors, £0.3 million on 30th April 2018 and £0.2 million on
31st July 2018 following agreement of the completion amounts.
TClarke Annual Report and Financial Statements 2017 129
28 Business combinations continued
The following fair value adjustments have been made to Eton’s reported assets and liabilities in arriving at the provisional
recognised amounts of identifiable assets acquired and liabilities assumed:
• Acquisition-related costs of £0.2 million have been charged to administrative expenses during the year and have been
disclosed as a non-underlying item (see note 7B).
The revenue included in the consolidated statement of comprehensive income since 4th August 2017 contributed by Eton was
£3.8 million. Eton also contributed profit of £0.0 million over the same period. It is impractical to assess the effect on the
consolidated statement of income from 1st January 2017 as no valuation of contracts exists at that date.
29 Group reorganisation
During the year, the Group completed a planned Group reorganisation to rationalise its legal structure and improve the future
efficiency of its operations.
The first phase, which was completed as at 31st December 2016, comprised the amalgamation of the Group’s operations in
London & South East and Central & South West regions into a single trading subsidiary, TClarke Contracting Limited, with a
separate subsidiary, TClarke Services Limited, employing all of the staff in these regions and providing internal support services
to support the operations of TClarke Contracting Limited.
The second phase, which comprised the amalgamation of the Group’s operations in the North and Scotland into this structure,
was completed as follows:
• On 31st December 2017, the businesses and trading assets and liabilities of all of the Group’s operations in the North and
Scotland regions were transferred to TClarke Contracting Limited at book value, in consideration for £6.0 million 10 Year
Variable Rate Loan Notes.
• Property, plant and equipment transferred was subsequently transferred to TClarke Services Limited, also at book value in
consideration for £0.3 million 10 Year Variable Rate Loan Notes.
• Also on 31st December 2017, the employment contracts of all the Group’s staff in the North and Scotland regions were
transferred to TClarke Services Limited.
• All loan notes earn interest at 2.5% above base rate.
Eton Associates Limited, which was acquired during the year (see note 28), has been retained as a separate operating entity
at present and has not been included in the Group reorganisation.
30 Subsidiary companies
All subsidiaries are wholly owned by TClarke plc unless otherwise stated, and all are incorporated within the United Kingdom.
Electrical and mechanical contractors
Type of shares
DG Robson Mechanical Services Limited*1
Eton Associates Limited1
TClarke Contracting Limited1
TClarke East Limited*2
TClarke Newcastle Limited**7
TClarke Leeds Limited**3
TClarke North West Limited**4
TClarke (Scotland) Limited**5
TClarke South-East Limited*1
TClarke South West Limited*6
* Trade transferred to TClarke Contracting Limited on 31st December 2016.
** Trade transferred to TClarke Contracting Limited on 31st December 2017.
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 130
Notes to the financial statements continued
for the year ended 31st December 2017
30 Subsidiary companies continued
Property holding company
Weylex Properties Limited1
Group services company
TClarke Services Limited1
Non-trading and dormant companies
AG Aylward EMS (Maintenance and Minor Works) Limited1
Anglia Electrical Services Limited1
GDI Electrical Company Limited1
JJ Cross Limited1
JJ Cross Services Limited***1
Mitchell and Hewitt Limited8
TClarke (Northern) Limited9
Waldon Security Limited****1
*** Shares held by JJ Cross Limited.
**** Shares held by TClarke South West Limited.
Registered offices:
1. 45 Moorfields, London EC2Y 9AE
2. 3 Kym Road, Bicton Industrial Park, Kimbolton, Cambridgeshire PE28 0LW
3. Low Hall Road, Horsforth, Leeds, West Yorkshire LS18 4EF
4. Wilton House, Ackhurst Park, Foxhole Road, Chorley PR7 1NY
5. 6 Middlefield Road, Middlefield Industrial Estate, Falkirk, Stirlingshire FK2 9AG
6. 20 St Austell Business Park, Carclaze, St Austell, Cornwall PL25 4FD
7. Hunter House, 17-19 Byron Street, Newcastle upon Tyne NE2 1XH
8. Windsor Court, Ascot Drive, Derby, Derbyshire DE24 8 GZ
9. Stanhope House, 116-118 Walworth Road, London SE17 1JL
Type of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
TClarke Annual Report and Financial Statements 2017 131
Shareholder information
Company details
Registered office:
45 Moorfields
London EC2Y 9AE
Telephone: 020 7997 7410
Email: info@tclarke.co.uk
Company registration number: 119351
The TClarke plc website
Shareholders are encouraged to visit our website www.tclarke.co.uk for further information about the Company. The dedicated
investors’ section on the website contains information specifically for shareholders, including regulatory announcements and
copies of the latest and past financial statements.
Registrars
The Company’s shareholder register is maintained by our Registrar, Link Asset Services (formerly Capita Asset Services). If you
have any queries relating to your TClarke plc shareholding, you should contact Link Asset Services directly by one of the
methods below:
Email: enquiries@linkgroup.co.uk
Telephone: 0871 664 0300
By post: The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Shareholder Portal: www.signalshares.com
If you are yet to register, you will need your investor code.
Analysis of shareholdings
The tables below show an analysis of Ordinary shareholdings as at 31st December 2017.
Individuals
Banks or nominees
Other corporations
Totals
Number of shares held:
1 to 5,000
5,001 to 10,000
10,001 to 50,000
50,001 to 500,000
500,001 to 1,000,000
1,000,001 to 5,000,000
5,000,001 to 10,000,000
Totals
Shares
Percentage
Holdings
Percentage
7,357,928
33,180,559
1,291,090
18%
79%
3%
784
260
29
73%
24%
3%
41,829,577
100%
1,073
100%
398,575
799,840
1,182,823
5,287,694
9,749,531
4,581,136
19,829,978
1%
2%
3%
13%
23%
11%
47%
429
227
163
190
46
6
12
40%
21%
15%
18%
4%
1%
1%
41,829,577
100%
1,073
100%
GovernanceFinancial statementsStrategic reportTClarke Annual Report and Financial Statements 2017 132
Shareholder information continued
Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Corporate broker
N+1 Singer
1 Bartholomew Lane
London EC2N 2AX
Tel: 020 7496 3000
Investor relations
RMS Partners Limited
160 Fleet Street
London EC4A 2DQ
Tel: 020 3735 6551
Financial calendar
Annual General Meeting
18th May 2018
Half Year results announcement
7th August 2018
Trading update release
15th November 2018
Final dividend for 2017
Ex-dividend 26th April 2018
Record date 27th April 2018
Payment due 25th May 2018
Interim dividend for 2018
Ex-dividend 6th September 2018
Record date 7th September 2018
Payment due 5th October 2018
These dates are indicative only and may be subject to change.
TClarke Annual Report and Financial Statements 2017 Every picture of central London tells a
TClarke story as we work with partners
to deliver a city for the future.
Building S5
For the new HQ for
the Financial Conduct
Authority we have
delivered large scale
mechanical and electrical
packages.
Building S6
For the new HQ for
Transport for London
we have successfully
delivered large scale
mechanical package.
TClarke plc | 45 Moorfields, London EC2Y 9AE | 020 7997 7400 | www.tclarke.co.uk
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7
22 & 100
Bishopsgate
On the skyline, 22 and
100 Bishopsgate, two of our
many current major projects
in the City of London.
20 Fenchurch St
Known as the Walkie Talkie.
We brought the first 33kV
power supply to a commercial
office in this project.
Olympic Stadium
We provided the electrical and
data cabling services for the
Olympic stadium and on call
FM services during the Games.
IQL S9
Following successful
completion of S5 and S6,
our teams have moved on
to work on building S9, this
will be the HQ for Cancer
Research UK and
The British Council.
Westfield
Stratford City
In 2008 we delivered
the electrical services for
Westfield London. In 2011 we
delivered Westfield, Stratford
City. In March 2018 we
completed the extension to
Westfield London.