Annual Report and
Financial Statements
2020
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INFRASTRUCTURE TECHNOLOGI E S
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In Touch With Tomorrow
TClarke Annual Report and Financial Statements 2020
Who we are
TClarke is an industry leader in the design, installation, integration
and maintenance of the digital, mechanical and electrical technologies
and infrastructures that a 21st century building needs for control,
performance and sustainability.
Across the UK, we provide a large-scale, flexible resource of
specialist expertise, based in market-leading Engineering Services and
digital capabilities, to help our customers deliver their construction
programmes safely.
Our reputation for high quality and the successful application of new
technologies has been built over 130 years.
Infrastructure
Technologies
Engineering Services
Residential & Hotels
Facilities Management
Contents
Who we are
Strategic Report
Chairman’s Statement
Chief Executive’s Report
Business Model
Our Strategy
Group Financial Review
Section 172 Statement
Sustainability
Principal Risks
Long-term Viability Statement
Governance
Financial Statements
01
02
08
09
10
14
16
22
26
27
66
2020 in numbers
Group Revenue
Underlying Operating Margin
£231.9m
2019: £334.6m
Underlying Operating Profit
£6.0m
2019: £10.2m
Underlying Earnings Per Share
10.29p
2019: 18.81p
2.6%
2019: 3%
Profit Before Tax
£1.2m
2019: £9.0m
Dividend
4.4p
2019: £4.4p
Forward Order Book
£456m
2019: £403m
Net Cash
£10.2m
2019: £12.4m
For further information and for a definition of underlying, forward order book and dividend, see page 11 of the Group Financial Review. See page
13 for definition and calculation of net cash.
TClarke Annual Report and Financial Statements 2020
Strategic Report
01
Investor Case
Our investor case shows a strong, balanced
business, funding its own growth and
focused on new technologies.
Chairman’s Statement
£
Balanced Business Model
Sustainable revenues across our five market sectors.
An integrated offering and expertise in technology
solutions differentiates us from competitors and we
strive to be the contractor of choice for all projects.
90% of our revenue comes from existing clients.
Improving Profitability
We are focused upon margin sustainability at 3% but
always seeking ways to improve upon this. We seek to
sustain this alongside a growing order book.
Disciplined and Robust Risk Management
We operate a highly effective and selective approach
to tendering and potential customer risk assessment.
We adopt a robust and consistent approach with
regard to profit recognition and claims provisioning.
EPS Growth and Progressive Dividend Policy
We strive to increase earnings over the cycle and are
committed to a progressive dividend policy, whilst
balancing the rewards to shareholders with the
interests of our wider stakeholders.
Growth Strategy
We have a revenue target of £500m within 3 years
whilst maintaining our operating margin.
Strong Cash Flow and Balance Sheet
Our cash generation is strong and planned capital
investment for efficiency and growth is funded from
internal resources. At 31st December 2020 net cash
stood at £10.2 million.
Forward Revenue Visibility
Our secured forward order book at 31st December
2020 stood at £456 million, including £168 million
booked for 2022 and beyond. Pipeline bid
opportunities typically exceed £1 billion.
In common with many businesses throughout the UK,
TClarke faced significant and unprecedented challenges
in 2020. It is therefore particularly pleasing that TClarke
has remained profitable and our average daily net cash
balance was positive throughout 2020. It is also a year in
which emerging opportunities for top line growth allows
us to announce a three year plan to deliver £500m of
revenue whilst maintaining our margins.
It is particularly important that we continue to grow
and develop the skills of all our people. Our people are
our future. It is heartening to note the leadership’s
continued support for 199 apprentices across the
Group and the decision to welcome a new cohort of
apprentices during summer 2020. These are not small
investments - but they are made with long-term belief in
our company.
As I look forward into 2021 and beyond, I am optimistic.
TClarke is very strongly placed to continue to grow and
deliver outstanding performance and results. This comes
from the success of its strategies and deliveries, the
quality of its products, services and methods, and from
the strength and depth of its client relationships.
However, the biggest strength and asset we have as we
move forward is our people. Their outstanding
achievements this year have allowed us to take a
positive stance and deliver as a business, and I want to
thank them all for their professionalism and hard work
during the period.
Iain McCusker
Chairman
24th March 2021
We delivered our underlying operating margin target
of 3% in the first quarter and in the second half of the
year. In the second quarter, at the height of the national
lockdown, we achieved a breakeven performance at the
operating level, which was an outstanding performance
given the significant impact this had on our sector
through site closures and major client driven project
delays and reschedules.
Swift and effective management responses and
actions in response to the pandemic have positioned us
strongly for the future. Our forward order book stands
at a record £456m, an increase of 13% on the year. This
increase is not represented by work delayed from 2020.
It results from new projects, many from existing clients
who value our stability, our relationship with them, and
our proven ability to deliver quality.
Our strategy of strengthening our core Engineering
Services markets while building and developing our
capabilities in key areas of technology and
infrastructure is succeeding. This was a major factor in
our 2020 performance. Importantly, however, it puts
us in a very strong position as we move into 2021
and beyond.
TClarke is very aware of the importance of our dividend
stream to shareholders and investors. We continue to be
fully committed to a progressive dividend policy and
continue to focus on our ability to ensure dividend
streams are maintained, while at the same time balancing
the needs and interests of all stakeholders. We fully
maintained our final and interim dividend payments in
2020 and we are proposing a 2020 final dividend of 3.65
per share – maintaining our 2019 dividend level.
02
TClarke Annual Report and Financial Statements 2020
Strategic Report
03
Chief Executive’s Report
Demonstrating Ambition - Setting
Attainable Growth Targets
It is my pleasure to reflect on 2020, a year like no other.
I feel a great sense of pride in what we have achieved.
We faced challenges as our business operations and
supply chains were disrupted and normal work
routines and social structures were interrupted.
However, we have stayed focused and demonstrated
that the business is strong, resilient, and capable of
delivering for all our stakeholders whatever the
circumstances. None of this would have been possible
without the dedicated contributions of our employees
all of which have played their part and without whom
we would not have been able to navigate this
challenging year, our people remain one of the unique
factors that we have at TClarke.
2020 Apprentice Intake Underlines our
Positive Outlook
Across the UK we welcomed 22 new apprentices to
our business - making the decision to do so during
the height of uncertainty in the first lockdown - when
it would have been very easy indeed to do otherwise.
This continued investment in new talent ensures we can
repeat our successes in the years to come.
Ambitious Business Plan to Deliver £500m
Annual Revenue
As we enter 2021 the Board has set itself an ambitious
strategically backed three-year plan to deliver £500m
annual revenues supported by a year end record forward
order book of £456m: £288m for 2021 and £168m for
2022 and beyond. The growth in our order book is an
important step in our plan to deliver growing revenue
targets whilst maintaining margins and continuing to
reward our shareholders.
As a UK wide, specialist engineering company with
market leading capabilities we focus in five key sectors:
Infrastructure
•
• Residential and Hotels
• Facilities Management
• Engineering Services
• Technologies
Our strategy for growth is very straightforward, a business
led by people empowered to deliver. Building upon long
term relationships, leading to continuous repeat business
which is as close to achieving reoccurring revenues as is
possible in our markets.
Being focused on excellence in delivery enables us with
confidence to be ambitious in setting this revenue target
for the Group. The five sectors we focus on are made up
of our established business strengths to which we have
supplemented with additional skill sets to ensure we can
offer the complete engineered solution whatever the
project, delivered in the most effective and
advantageous way using the best technologies.
£500m
3 YEAR PLAN
As we enter 2021
the Board has set itself
an ambitious three year
plan to deliver £500m
annual revenue.
1
2
3
Expanded Potential Market Creates Headroom
for Growth
Our growth potential is a result of previous
investments in our offering and in the business as a
whole, the broader opportunities available to TClarke
are now permanently greater The mechanical division
of our Engineering Services has doubled its revenues
in recent years with the flagship project KGX1 at Kings
Cross well underway. At completion over 70% of the
project will have been designed and prefabricated off
site. Our technology business is already contributing
14% of turnover.
The range of potential packages available to TClarke
within a major project has grown significantly and with
the business less dependent on the traditional
contracting sectors, by way of illustration providing
1.275 million sq ft of flexible workspace the recently
completed 22 Bishopsgate project offers a clear picture
of this effect and shows the sensible additional
headroom we can grow into going forward.
Five Strong Sectors – Growth Opportunities
Our potential for growth to meet our ambitions is clear.
The opportunities before us are of a considerable scale
led by an effective Group which, fit our high-quality
engineering skillset. We illustrate some examples below.
Infrastructure
We are extremely well positioned in the key growth
sector of healthcare. This sector requires complex,
technical engineering solutions and in 2020 we secured
further projects to underpin our capacities.
Our selection for £40m of healthcare packages in the
South West is one of the very first to be announced
from the Government’s £3.7bn ten-year, Health
Infrastructure Plan, is a major success for the business.
We know that we are one of a handful of UK companies
with the scale and skillset to deliver these projects.
As our healthcare teams engage with the NHS at
national level, we also hold four strategic advantages:
1) 70% Offsite Manufacture Target - The NHS target of
using modern construction methods in the HIP projects
is heavily focused on offsite manufacture. Our in house
DfMA (Design for Manufacturing and Assembly)
capability is therefore of huge importance.
2) Smart and Digital Buildings - Our exclusive
partnerships with leading smart buildings software
providers, gives us the potential to be a clear industry
leader in smart hospitals - once again this represents a
major advantage for us.
3) Net Zero Carbon Target - The Government pledge
to achieve this target by 2050 means that all these
hospitals will need to achieve net zero or be a long
way down the road in doing so. Our current work on
the most technically advanced large scale Passivhaus
(low energy) project in the country in Exeter is therefore
another major advantage.
4) Adaptability for Future - Taken together, our
longevity in healthcare construction, current leadership
in smart and sustainable large buildings, and overall
group demonstration of innovation in the sector provide
a very strong and under this heading too
As well as the vast potential of healthcare, we are
also very strong in education. We have delivered 49
projects in this sector in 2020 (previously on the EFA,
and now the ESFA Framework) and have secured a
further 25 projects commencing in 2021.
Our confidence for future opportunities was bolstered
with the government’s announcement for a further
£1bn funding for a further round of 50 schools for the
medium term.
Residential and Hotels
Our Scotland team reported highly buoyant residential
markets in 2020, with a record 2,500 new homes already
secured for 2021. They went on to win their largest
residential project ever - a first phase of 170 new homes -
at the 1,000 home £250m Northbridge development. One
of the direct benefits of increased agility is our confidence
within the regional residential markets where the work of
our regional teams has shown we can deliver large scale
residential successfully from every point of view. As a
result, the group is actively evaluating large scale
04
TClarke Annual Report and Financial Statements 2020
Strategic Report
05
Chief Executive’s Report continued
residential opportunities across the UK with our long-term
house building partners in areas we currently under-serve.
London landmark office projects including
highlighting our regional engineering expertise, quality
work and resource scale.
TClarke currently has live opportunities on four
significant schemes in the South East.
The Group is immensely proud of the range and calibre
of hotel projects we are involved with, current landmark
schemes include The Peninsula Hotel at Hyde Park
Corner and the Pan Pacific Hotel, in the City of London.
For future opportunities in London, 19 hotel schemes
with 2,891 rooms are under development for 2022 and
another 37 are in the pipeline for 2023, bringing an
extra 6,993 rooms.
Facilities Management
We provide market-leading in-house Facilities
Management (FM) expertise in a complete range of
mechanical and electrical specialisms from chilled water
systems and BMS controls to fire safety systems and air
handling plants. Our in-house teams provide preventative
services to address legislation, manufacturer
recommendations, best practice and specific client needs.
We also provide 24/7 call-out services nationwide.
FM delivers sustainable reoccurring revenues and
margins with minimal risks. FM also allows us to
leverage the power of our Group-wide, directly
employed expert resource to deliver a unique range of
specialist M&E services for the FM industry.
Engineering Services
Our core Engineering Services has won major new
• 8 Bishopsgate, City of London
• Bankside Yards, Southwark
• Facebook, Kings Cross
• Gateway Central, White City
• Ruskin Square, Croydon
A key part of our strong performance across all sectors
has been our advanced offsite DfMA manufacturing
facility at Stansted. This capability and expertise in
prefabricating and modularising large Engineering
Services of all kinds for precision installation within a
building, is increasingly the key to our winning and
delivering major projects - it has become exactly the
strategic advantage we hoped it would be.
Outside of London the news has been just as
encouraging. Having identified the North West as a
strong market for our Engineering Services offering
and setting up in Liverpool and Manchester, in 2020 we
won our first major project - the £3.5m Royal College of
Physicians, in Liverpool.
In the South West we are underway with Britain’s most
advanced and ambitious large scale Passivhaus
development - St Sidwell’s Leisure Centre, Exeter -
whilst in parallel resource and engineering expertise
helped design and deliver the Exeter NHS Nightingale
hospital in just six weeks. Just a couple of examples
Technologies
The opportunity is just as exciting in data centres. This
is a worldwide growth sector.
Data consumption is ever increasing, and we forecast
a decade long boom in the requirement of data centre
capacity ahead of us to deliver the fully digital world
we are moving into, driven by enterprise cloud and
software utilities, office productivity and file storage
as well as e-commerce, social networking, streaming
video services, gaming, and mobile apps.
The engineering of data centre requires specialists’
skills which we possess to not only deliver complex
designs but to demanding timescales. Moreover, our
strengthening relationships with some of the biggest
hyperscalers in the global industry will ensure we have
the ability to secure the most high-profile schemes.
This growth of opportunity within the UK data centre
market means that there is more potential for us here
than we reported last year, whilst continuing to
actively evaluate options in Europe, alongside our
global partners.
Market data shows 39 current large data centre
projects in the UK with a construction value of £1.35bn.
Good Governance
The feedback from many of our customers is that the
levels of corporate governance, risk management and
transparency that come with our public listing and the
‘TClarke Way’ of working are also of considerable
competitive value. This is a significant factor in the
selection process - particularly for the major projects
we target.
Outlook and Summary
In summary having secured such a strong order book at
this early stage of the year gives the Board strong
confidence for the year ahead. Following a slightly
slower start we expect revenues and profit to build
rapidly throughout the course of the second half of the
year as our recently secured projects gain momentum.
We remain focused on delivering results for all our
stakeholders and have the capacity and depth of
expertise to expand to successfully meet our ambitious
goal of £500m revenues, 2021 marks an exciting new
chapter in the evolution of TClarke.
Mark Lawrence
Group Chief Executive Officer
24th March 2021
Infrastructure
Residential
& Hotels
Facilities
Management
Engineering
Services
Technologies
£500m
3 YEAR
PLAN
1
2
3
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TClarke Annual Report and Financial Statements 2020
Strategic Report
07
On our Journey to £500m Turnover
Our five core sectors can support a step change
in scale for TClarke and 2020’s wins have set us in
a strong position.
Infrastructure
Residential
& Hotels
Facilities
Management
Engineering
Services
Technologies
£100m
Forward order book
2019: £89m
£115m
Forward order book
2019: £110m
£19m
Forward order book
2019: £12m
£175m
Forward order book
2019: £142m
£47m
Forward order book
2019: £50m
£59m
2020 Revenue – 2019 £56m
£42m
2020 Revenue – 2019 £56m
£18m
2020 Revenue – 2019 £29m
£81m
2020 Revenue – 2019 £148m
£32m
2020 Revenue – 2019 £45m
No. of 2020 Projects in
Order Book
Projects
No. of 2020 Projects in
Order Book
Projects
No. of 2020 Projects in
Order Book
Projects
No. of 2020 Projects in
Order Book
Projects
No. of 2020 Projects in
Order Book
Projects
Defence
Education
Healthcare
Prisons
Other
Government
10
49
36
4
15
Totals
114
5
25
36
3
11
80
Hotels
New Build
Refurbishment
3
82
10
4
73
4
Long Term
Frameworks
Planned and
Reactive
Maintenance
2,303
2,431
11,891
12,552
Commercial
Offices
Leisure
Retail
Other
29
11
8
16
32
9
5
4
Totals
95
81
Totals
14,194
14,983
Totals
64
50
Manufacturing
and Prefabrication 3
Data Centres
Smart
Buildings
Other
Totals
1
23
7
6
2
20
7
34
35
08
TClarke Annual Report and Financial Statements 2020
Strategic Report
09
Business Model
Our strategic advantages give us market
leadership. Our service mix allows us to
deliver value at each stage of the project.
Our delivery is underpinned by our core
values, known as The TClarke Way.
Our Strategy
A strategy for profitable growth
Our Strategic
Advantages
What we do
Value Created for
our Stakeholders
Objective
How we will Achieve it
2020 Achievement
Highlights
Infrastructure
Residential
& Hotels
Facilities
Management
Engineering Services
Technologies
People
We directly employ expert
professional engineering
staff and operatives and run
industry-leading
apprenticeship and future
leader schemes to sustain
our talent pipeline.
Relationships
We focus on building
long- term relationships with
principal contractors and
clients, underpinned by
a systematic programme of
engagement.
Nationwide Coverage
We cover the whole of
mainland UK with 19 offices
to serve our clients where
they need us. We can deliver
international projects where
the opportunity meets our
business goals.
Integrated Services
And Technology
We offer integrated and
complete building services.
We are a high-technology
business and leaders in
the delivery of complex
installations, prefabrication,
Design for Manufacture and
Assembly (DfMA) and new
digital technologies.
Reputation
Our performance maintains
our brand reputation for total
reliability, safety, delivery
and quality.
Design
We design and value-engineer systems,
drawing on our expertise to provide
intelligent building solutions.
Procure
We add value through expert
procurement of equipment, materials,
services and expertise across the life
of a project.
Install
We employ highly-qualified and
experienced in-house engineering teams
of professionals and operatives to install
and deliver our solutions and services.
Maintain
Our in-house teams deliver specialist
mechanical, electrical and digital
infrastructure maintenance services to
support the ongoing functioning of a
building through its lifecycle.
Shareholders
The total dividend has
increased by 38% over the
last five years.
Customers
Total reliability in project
delivery, quality and safety,
operating a collaborative
and open approach to work
which maximises value,
efficiency and productivity.
Employees
Industry-leading career
paths and project work to
take pride in. 42
participants in the Future
Leaders programme and
199 apprentices in training
in 2020.
Suppliers
A collaborative and open
approach to the working
relationship, providing fair
payment terms.
Community and
Environment
Delivery of high-quality built
environments across the UK.
Support for the local and
wider community in which
we work.
Sustainable 3%
Operating Margin
Through successful targeted tendering and
operational efficiency, we will focus on delivering a
3% operating margin.
• Operating margin of 3.0%.
For Q1, H2 2020.
Breakeven Q2 2020.
£500m p.a. Revenue Target
We focus on five market sectors. We intend to grow
our market share organically by winning and
delivering larger scale opportunities accross all
sectors throughout the UK. In addition we
continue to target Data Centres in Europe on a
selective basis.
• Strategic partnership
established with smart
technology provider.
• Record order book £456m
• Number of significant bids
awaiting decision.
Remain Contractor
of Choice for
Landmark Projects
There is a substantial premium market of major
London projects and their complexity and scale
means few can deliver the same quality of work,
depth of resource and integrated services offering
as TClarke.
We will continue to target and deliver this work and
increase our market and engineering leadership.
• 8, 22, 100 & 150
Bishopsgate, London
• One Nine Elms, London
• KGX1, Kings Cross, London
• Beaufort Park, London
• The Peninsula Hotel, London
• Battersea Power Station,
London
Maintain a Balanced
Business
We balance our business by strategic management
of our order book with a blend of existing markets
of Infrastructure, Residential and Hotels, renewing
FM contracts, Engineering Services and new
markets such as Technologies.
No dependence on one
market sector in respect of
revenue:
Engineering Services 38%
Infrastructure 22%
Residential & Hotels 25%
Technologies 10%
Facilities Management 4%
Build Long-term,
Lasting Relationships
We will continue to grow, supporting principal
contractors and our clients, working on major
projects across the UK, leveraging the quality of our
regional resources and national brand reputation.
• 90% of turnover in 2020
was with repeat clients
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TClarke Annual Report and Financial Statements 2020
Strategic Report
11
Group Financial Review
Summary of Financial Performance
The Group has shown its strength and resilience in the
most difficult of years. Underlying operating profit was
maintained at 3% in Q1 2020; broke even in the face
of a 50% drop in revenue Q2 vs Q1; returning to 3%
for H2. Underlying earnings per share were 10.29p.
TClarke paid its 2019 final dividend in full in July 2020
and maintained its level of interim dividend.
TClarke remains financially secure; Average daily net
cash remained positive throughout 2020 and in
addition the Group has £25 million of bank facilities at its
disposal. The £15 million RCF facility has been extended
to August 2024 on its normal terms. The Group has not
needed to apply for any of the COVID-19 loan schemes.
Performance
The Group remained profitable for the year ended
31st December 2020 in spite of all the challenges
resulting from the COVID-19 pandemic. Underlying
operating profit was £6 million (2019 £10.2 million) at a
time when turnover fell to £231.9 million (2019:£334.6
million). The reduction in turnover was the result of site
closures or sites operating with much reduced numbers
between mid March and end of July.
The Group undertook a swift restructuring programme
to protect the health of the business. The cost of the
programme was £3.7 million accounted for in non
underlying items. The programme has reduced the
Group’s cost base by in excess of £4 million per
annum; 2020 results have benefited by £2.5 million
of these savings.
Overall TClarke reported a statutory operating profit of
£2.1 million before interest and tax (2019: £10.0 million).
Finance costs fell to £0.9 million (2019: £1.0 million)
Finance costs comprise: £0.3 million bank interest (2019:
£0.2 million); a reduction in the Group’s defined benefit
pension scheme interest charge of £0.2 million to £0.5
million (2019: £0.7 million) and an interest charge of £0.1
million arising from IFRS 16 (2019: £0.1 million).
There is no tax charge for the year. (2019: £1.2 million).
This was primarily due to prior year tax adjustments.
TClarke maintains an open and transparent working
relationship with HMRC.
The Board is proposing a final dividend of 3.65p (2019:
3.65p), maintaining the 2019 dividend level. Total
dividend for the year therefore remains at 4.4p (2019:
4.4p). The dividend is covered 2.2 times by underlying
earnings. TClarke recognises that many of its
shareholders invest for dividends.
We move into 2021 with a forward
order book at £456 million (2019:
£403 million) providing excellent
revenue visibility.
£456m
2019: £403m
“Year-end net cash was
£10.2 million (2019: £12.4 million).
Average daily net cash was positive
throughout 2020.”
Trevor Mitchell
Group Finance Director
Revenue
Operating profit
– Underlying1
– Reported
Profit before tax
– Underlying1
– Reported
Profit after tax
– Underlying1
– Reported
Profit for the year
Earnings per share - basic
– Underlying2
– Reported
Dividend per share
2020
£m
231.9
6.0
2.1
5.1
1.2
4.3
1.2
1.2
2019
£m
334.6
10.2
10.0
9.2
9.0
8.0
7.8
7.8
10.29p
2.87p
4.4p
18.81p
18.37p
4.4p
1. Underlying operating profit, profit before tax and operating margin are stated before amortisation
of intangible assets and restructuring costs.
2. Underlying earnings per share is calculated by dividing underlying profit after tax by the weighted
3. Dividend per share represents the interim and final dividend proposed or paid for the year in question.
Forward Order Book
Market sector
Infrastructure
Residential & Hotels
Technologies
Engineering Services
Facilities Management
2020
£m
99.9
115.1
46.8
175.2
19.0
2019
£m
89.0
110.0
50.4
141.9
11.7
%
change
11%
5%
(7%)
23%
62%
Forward Order Book comprises jobs which are secured through contracts or letters of intent.
Progressive Dividend Policy
2016 -2020
4.4
4.4
4.0
3.5
3.2
2016
2017
2018
2019
2020
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TClarke Annual Report and Financial Statements 2020
Strategic Report
13
Group Financial Review continued
2020 Underlying Operating
Profit by Region
2020 Revenue
by Region
2020 Underlying Operating
Margin by Region
London
UK South
UK North
Group costs
Total
£m
4.9
2.7
0.7
(2.3)
6.0
London
UK South
UK North
Total
£m
134.6
55.1
42.2
231.9
For comparatives see narrative below.
6%
5%
4%
3%
2%
1%
0
London UK South UK North
London
Revenue from our London operations fell to £134.6 million
(2019: £201 million). The fall in revenue was as a direct result
of some large London sites remaining closed during the first
national lockdown until a safe method of working could be
established. These sites opened during the second half of
2020 and remain open. London generated an underlying
operating profit of £4.9 million (2019: £8.2 million).
Underlying operating margin was 3.6% (2019: 4.1%).
For 2021 the region is engaged on a number of high-profile
shell and core commercial and hotel developments all of
which offer future fit-out opportunities. A number of areas
continue to be regenerated and offer large -scale mixed
commercial and residential opportunities such as the
International Quarter London, Battersea Power Station,
Kings Cross and the area of Bishopsgate, London.
London is currently working on some key data centres and is
also bidding a number of data centre opportunities both in
the UK and Europe.
In addition, TClarke has an exclusive contract to sell, install
and maintain the Gooee suite of products offering both initial
and recurring revenue streams.
UK South
Revenue from UK South fell by 17% to £55.1 million (2019: £66.3
million) but the focus on higher-quality projects has resulted in an
underlying operating profit of £2.7 million (2019: £3.6 million)
giving rise to an underlying operating margin of £4.9% (2019:
5.4%). The region has developed a high-quality customer base
providing a significant quantity of repeat business.
The region is particularly strong in infrastructure with many
projects being undertaken in defence, education and
healthcare. Of particular note TClarke delivered the Exeter
Nightingale Hospital in 6 weeks during May and June 2020.
Our established FM operation in Birmingham is performing well
and has a pipeline of opportunities, many with repeat customers.
UK North
Revenue fell to £42.2 million (2019: £67.3 million), in part
the result from Scotland being unable to work on any sites
for a number of months. UK North generated an underlying
operating profit of £0.7m million (2019: £1.4 million) in spite
of the site closures. Underlying operating margin was 1.7%
(2019: 2.1%). Within the region, Scotland’s residential work
performed well in the latter part of the year; a number of
educational projects were delivered by the Leeds office and
our recently opened offices in Manchester is well on the way
to completing its first major project.
Pension Obligations
The triennial valuation of the pension scheme at 31st December
2018 showed a deficit of £24.9 million, representing a funding
level of 59% (2015 valuation: deficit £14.9 million, funding level
67%). The principal reason for the increase in deficit is the fall in
long-term interest rates over the period.
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 2018 valuation, the
Group has agreed to continue the deficit reduction
contributions of £1.5 million per annum. The recovery plan
period is 12 years. The Group continues 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 April 2020 the future service contribution increased
to 22.4% of pensionable payroll (including employee
contributions). Employee contributions increased from 10%
to 12% from 1 July 2020.
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
loss net of tax of £4.8 million (2019: loss of £5.7 million), has
been recognised in reserves, with the pension scheme deficit
rising by £3.8 million to £30.2 million (2019: £26.4 million).
Cash Flow and Funding
Cash balances totalled £25.2 million at 31st December 2020
(2019: £12.4 million). £15 million RCF was drawdown at 31
December 2020 (2019: Nil) resulting in net cash of £10.2
million (2019: £12.4 million).
The Group has a £15.0 million revolving credit facility, which
is committed until 31st August 2024, and a £10.0 million
overdraft facility, renewable annually and repayable on
demand. Interest on overdrawn balances is charged at 2.0%
above base rate, and interest on balances drawn down under
the revolving credit facility is charged at 1.7% above LIBOR,
fixed for the duration of each drawdown. The Group was
compliant with the terms of the facilities throughout the year
ended 31st December 2020 and the Board’s detailed
projections demonstrate that the Group will continue to
meet its obligations in the future.
The Board’s detailed cash flow projections include an
allowance for the impact of a change in the VAT regime
from 1st March 2021. From this date the Government has
introduced a VAT domestic reverse charge for building and
construction services. Under this scheme TClarke will
continue to charge VAT to end customers but will no longer
be able to charge VAT to contractors and will not pay VAT on
costs incurred with subcontractors.
The Board’s projections show that TClarke is expected to
maintain a healthy cash position throughout the next three
year period.
Goodwill and intangible assets were £25.3 million (2019: £25.5
million). The Board has undertaken a rigorous impairment
review in respect of the intangible assets at 31st December
2020 and concluded that no impairment is necessary.
Accounting Policies
The Group’s consolidated financial statements are prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act
2006, and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. There have been no new Accounting
policies adopted in the year.
Financial Risk Management
The Group’s main financial assets are contract and other trade
receivables, 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.
The Group also has in place £40.1 million of bonding
facilities (2019: £40.1 million), of which £27.0 million were
unutilised at 31st December 2020 (2019: £21.7 million.)
Trevor Mitchell
Group Finance Director
24th March 2021
Net Assets and Capital Structure
The Group is funded by equity capital, retained reserves and
bank facilities, and there are no plans to change this structure.
Shareholders’ equity is £15.7 million (2019: £22.9 million).
Cash Performance (£M)
22
20
18
16
14
12
10
8
6
4
2
0
(2.0)
3.0
(1.5)
(1.9)
12.4
6.0
(3.7)
10.2
(2.1)
1 Jan 2020
Net cash
Underlying
operating profit
Working capital
movements
Investment
Pension deficit
reduction
Dividends
Restructuring
costs
Other
31 Dec 2020
Net cash
14
TClarke Annual Report and Financial Statements 2020
Strategic Report
15
Section 172 Statement
Section 172 of the Companies Act requires each Director to
act in the way they consider, in good faith, would most likely
promote the success of the Company for the benefit of its
shareholders. In doing this, the Director must have regard,
amongst other matters, to:
• The likely consequences of any decision in the long term;
• The interests of the Company’s employees;
• The need to foster the Company’s business relationships
with suppliers, customers and others;
• The impact of the Company’s operations on the
community and the environment;
• The reputation for high standards of business conduct;
• The need to act fairly between members of the Company.
The Board of Directors have complied with these
requirements.
As a Board we have always taken decisions for the long term,
and collectively and individually our aim is always to uphold the
highest standards of conduct. Similarly, we understand that our
business can only grow and prosper over the long term if we
understand and respect the views and needs of our customers,
colleagues and the communities in which we operate, as well as
our suppliers, the environment and the shareholders to whom
we are accountable. This is reflected in our business principles,
and the Sustainability section on pages 16 to 21 sets out in more
detail how we manage our relationships with them.
Summary of how the Board Engages with our Stakeholders
The following table describes how the Directors have had
regard to the matters set out in section 172(1) (a) to (f) and forms
the Directors’ statement required under section 414CZA of the
Companies Act 2006.
Iain McCusker
Chairman
24th March 2021
Stakeholder
Group
Shareholders
and Potential
Shareholders
Our People
Customers
Suppliers
Why we engage
How we engage
• Continued access to capital is
important for the long term success
of our business
• We work to ensure that our
shareholders and their
representatives have a good
understanding of our strategy,
business model and culture
• We create value for our shareholders
by generating strong and sustainable
results that translate into dividends
• Annual Report and Financial
Statements
• Corporate website
• Social media
• AGM
• Results announcements and
presentations
• Shareholder and analyst meetings
with management, followed by
feedback from brokers and
financial PR consultants
• Private investor events
What matters to
this Group
• Long term value creation
• Growth opportunity
• Financial stability
• Culture
• Transparency
• Ethics and sustainability
• The Company’s long-term success is
predicated on the commitment of
our workforce to the values
embodied in the TClarke Way
• We engage with our workforce to
ensure that we are fostering an
environment that they are happy to
work in and that best supports their
well-being
• We believe TClarke is a great place
to work and we can only deliver our
services to our customers through
the hard work and commitment of
our workforce
• Designated Non-Executive Director
has Board responsibility for
engagement with the workforce
• The Non-Executive Directors
undertake a programme of regional
office visits and visit project sites
• Annual conference for Regional
Directors and weekly conference call
• The TOMMY employee hub
• TClarke Career Pathway and
Training Academy
• TClarke Future Leaders Programme
• Whistleblowing Policy
• Health and safety
• Fair employment
• Fair pay and benefits
• Diversity and inclusion
• Training, development and
career opportunities
• Responsible use of personal
data
• Environment
• Ethics and sustainability
• Our purpose is to design, install,
integrate and maintain the full range
of mechanical and electrical services
and the digital infrastructure to
create a 21st century building
• We aim to build long-term lasting
relationships with principal contractors
and clients and remain the contractor
of choice for landmark projects
• TClarke has deep, long-term
partnerships with both major
principal contractors and with
property owners and developers
• We offer a full, comprehensive
service during the lifecycle of a
project through design,
procurement, installation and
maintenance
• Our suppliers are fundamental to
the quality of our product and
services and to ensuring we maintain
the high standard of work we set
ourselves
• Suppliers must demonstrate that
they operate in accordance with
recognised standards that uphold
human rights and safety, prohibit
modern slavery and promote
sustainable sourcing
• TClarke employ a formal supply
chain management selection process
to build our approved and preferred
supply chain list.
• Key supply chain partners are
invited to TClarke’s Health, Safety
and Environmental meetings to
understand Health & Safety best
practice
• Regular performance reviews of
all key supply chain partners for total
reliability in project delivery
• Total reliability in project
delivery
• Quality of product
• Health and safety
• Responsible use of personal
data
• Environment
• Ethics and sustainability
• Fair trading and payment
terms
• Anti-bribery
• Ethics and slavery
• Environment and sustainable
sourcing
Community and
Environment
• We aspire to be responsible
members of our community as it
reflects our principle to do the
right thing
• We are committed to minimising
the impact of our business
operations on the environment
• The community and environment
is also important to our workforce,
customers and shareholders
• TClarke is proactive in its corporate
responsibility to the local and wider
community in which we work
• We encourage employee
involvement in community projects
and programmes
• Charitable donations and
sponsorships
• Volunteering
• Energy usage
• Recycling
• Waste management
16
TClarke Annual Report and Financial Statements 2020
Strategic Report
17
Sustainability
Environmental Sustainability
Environmental Sustainability
Carbon
Impact
Pollution
Prevention
Protection
of Habitats
and Natural
Resources
Responsible
Sourcing
Zero
Waste
Social Sustainability
Workforce
Wellbeing
and Retention
Diversity,
Inclusion
and Respect
Stakeholder
engagement
Supply Chain
and Human
Rights
Social
Value
For more information about our activity to minimise our impact on the environment, visit www.tclarke.co.uk
Sustainability the TClarke Way
Active Collaboration with World Class Partners; Positive
Action in our Areas of Direct Control
We recognise the impact climate change has on the
environment and society and accept the known environmental
implications of our engineering works and procedures. We are
committed to minimising the impact our business operations
have on the environment and continue to actively manage our
energy efficiency.
In key areas of environmental sustainability, the nature of our
work as specialist engineers means that our strongest impacts
can be generally achieved by collaborating with progressive
clients and principal contractors nationwide upon whose
programmes we work.
targets and the highest standards of environmental
performance, from Passivhaus, to Well Building and BREEAM
standards of quality.
In many areas of social sustainability, TClarke can and does take
the lead, creating social value and strong performance for the
benefit of all our stakeholders, supporting fully the ethos and
objectives of Section 172 of the Companies Act.
Non-financial Information Statement
This section (pages 16 to 21) provides information as required
by regulation in relation to:
• Environmental matters
• Our employees
• Social matters
• Human rights
• Anti-bribery and corruption
By doing so, our teams not only adhere to and help deliver
benchmark standards for sustainable performance, we also
support the achievement of groundbreaking sustainability
Other related information
• Our business model (page 8)
• Principal risks (pages 22 to 25)
Environment
TClarke recognises and accepts the known environmental
implications of its engineering works and procedures and
is committed to minimising the impact our business operations
have on the environment. 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.
Greenhouse Gas Emissions (CO2e)
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 2020.
Our CO2e emissions have been calculated using UK
Government guidelines for conversion of fuels and electricity.
Greenhouse Gas Emissions
Scope 1 emissions
(tCO2e)
2020 2019
1,654
2,098
Scope 2 emissions
(tCO2e)
Total Scope 1& 2 emissions
(tCO2e)
Revenue (£m)
Emissions / £ million revenue
(£1m)
164
211
1,818
231.9
2,309
334.6
7.8
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.
Net Zero Carbon Roadmap to 2030
2309*
tonnes CO2e
Scope 2
Emissions
Scope 1
Emissions
Reduce
embodied
carbon
Electrification
of fleet
and plant
Scope 2 Emissions
Scope 1 Emissions
Reduce
energy
intensity
Increase
renewable
energy supply
*2019 starting point
DECARBONISATION
ACTIONS
Offset residual
emissions
to net zero
0
tonnes CO2e
18
TClarke Annual Report and Financial Statements 2020
Strategic Report
19
Our People
Positive Culture, Local Opportunities and
a Pipeline of World Class Engineers
TClarke recognises that as a specialist engineering company, we
can play our role by rooting ourselves in local communities and
providing high quality, long term career paths and opportunities
for people. Equally we can promote and deliver the highest
possible standards of health, safety, wellbeing and respect for
people - our own employees and those with whom we work.
Our apprenticeships, adavanced future leaders training and
our health, safety and wellbeing programmes are by accepted
metrics, absolute industry leaders and deliver far beyond the
benchmark norms.
This does not happen by chance or without substantial cost or
long term investment. TClarke’s longstanding commitments and
deep cultural focus across these areas is central to who we are,
the pride we take in our business and the value that we deliver
to our stakeholders.
Diversity, Inclusion and Respect
TClarke recognises fully the need to actively foster and create an
environment where everyone is respected and fully empowered
to be their best.
As an organisation which relies heavily on the qualities its
people display daily when working in collaboration with our
partners, this idea has strong practical value and application
and is embedded within our working culture. Going forward,
we have no complacency. We recognise the need to constantly
improve and work hard to further the goals of this agenda within
our business.
Responsibility
In each community where we operate, we endeavour to operate
in a way which adds both financial and non-financial value to the
local economy. This section of the Annual Report focuses on the
responsible approach we take on areas of non-financial
performance. This activity has an impact on the way we run our
business and on our performance, revenue and profit.
Our policies
TClarke is committed to creating a diverse and inclusive place to
work, where our people can be themselves and be at their best.
The Group maintains an equality and diversity policy,
recruiting and promoting employees based on their aptitudes
and abilities, regardless of age, sexual orientation, ethnic or
national origin or colour, sex, transgender status, religion or
belief, pregnancy and maternity, marital or civil partnership, or
any other group who face disadvantage in our society.
TClarke 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.
Community
With regards to social engagement and the local community,
TClarke understands its corporate responsibility to the local and
wider community in which we work. TClarke are registered with
the Considerate Constructors Scheme and monitored against a
Code of Considerate Practice designed to raise industry
standards and requires us to carry out our construction activity
with the greatest care and consideration.
Following the outbreak of Covid-19, we have continued to work
with communities and provide help where needed.
• The UK South Team had an exceptional year with every team
playing its part, delivering NHS Nightingale facilities in record
breaking time. The team delivering NHS Nightingale Hospital
Exeter worked around the clock to deliver a £6.5m
infrastructure package in under 6 weeks.
• Further work for the NHS included installing the first
temperature reading cameras in the UK.
• TClarke supported the roll out of circa 300 testing stations
across the UK with electrical installation and maintenance.
Donations have also been made to local communities to
support those who are struggling in many different ways at this
time including families, foodbanks, VODA’s Good Neighbour
Project and St Rollox Community Outreach.
TClarke and its people value the contribution we can make
through charitable organisations and sponsored events that we
support. TClarke employees often partake in company/client
organised charity events such as ‘Tough Mudder’ and ‘Nuclear
Race’. Last year, TClarke supported Maggie’s, a charity which
supports people with cancer and their families, and sponsored
ISG’s first-ever virtual challenge Move for Charity 2020 for their
charity partner, Mental Health UK.
Human Rights
Whilst TClarke does not have a separate human rights policy,
a respect for human rights is implicit in all our employment
policies, corporate values and policies on data protection,
privacy, modern slavery, anti-bribery and corruption.
Training and Development
The annual TClarke Apprentice of the Year is a key part of
our culture and all finalists gain automatic entry to our Future
Leaders programme. The standard of entrant is extremely high.
Through the usual strict process we managed to get the number
down to 3 finalists; Ryan Pitcher (London) Chris Marshall (UK
South and Nicholas McKenna (UK North). In a very close final,
Ryan emerged victorious this year.
Future Leaders
The Future Leaders Programme identifies strong leadership
candidates at various stages of their careers within our business
and provides them with continuous additional professional
training, networking, and personal development.
We currently have 42 employees enrolled on the Future
Leaders Programme.
All Future leaders gain opportunities for growth and career
progression and many have moved into management positions
across the TClarke Group, some are currently project managing
some of the biggest projects TClarke have in London.
Apprentice Intake 2020
We are renowned for our apprentice programme within the
industry and have one of the highest intakes in our sector.
We currently have 199 apprentices currently working their way
through the programme. As a group our normal intake level is
around 40 apprentices every September. Despite COVID-19
and projects being delayed we continued with an intake of 22
(still in advance of the industry gold standard for a normal year.)
TClarke’s longstanding culture and approach to quality has
driven our continued commitment in this area.
TClarke Academy
TClarke operates a Career Pathway and Training Academy
designed to provide employees with a clear career pathway
with training and opportunities for personal and professional
growth to achieve their goals. We have successfully rolled out
an eLearning platform to ensure all staff are trained in TClarke’s
procedures and kept up to date with new systems and
technologies.
Tommy Digital Employee Hub
TClarke has in 2020 continued the highly successful roll out of
our digital employee Hub Tommy. The Hub provides all our
employees with a direct digital resource for a series of HR
services and information. It also gives the company an
immediate and highly efficient communications channel.
During 2020 we have continued the roll out of new and
improved services on Tommy. Tommy also delivers substantial
subsidiary advantages in cutting the consumption of paper and
energy across the business.
Anti-bribery & Corruption
TClarke values its reputation for lawful and ethical behaviour
and has zero tolerance of any form of bribery or inappropriate
inducement to ensure that business can be conducted in a free
and fair market. Our anti-bribery and corruption policy has been
communicated to all staff and is published on TOMMY, the new
TClarke employee hub. Every individual and organisation that
acts on the Company’s behalf or represents the Company is
responsible for ensuring that this principle is upheld and the
policy is implemented so that the Company conducts all
business in an honest and professional manner in line with the
Bribery Act 2010.
Gender Pay
Gender is just one aspect of diversity, we remain steadfast in
our commitment to create a diverse, inclusive culture, one which
supports and encourages everyone to give their best, and bring
their whole selves to work.
Hourly pay
2019
36%
35%
2020
30%
23%
Bonus pay
2019
48%
91%
2020
84%
67%
Mean pay differential (average)
Median pay differential (mid-point)
In the construction sector, there is a long-standing lack of
women in the industry. For those women who are employed in
the industry they are usually in non-delivery or non-client facing
roles and often in more junior positions. This means that across
construction a significant pay and bonus gap exists between
men and women. The small proportion of women employed
means that the measures above, particularly the bonus measure,
can be volatile from one year to the next.
The TClarke Group as a whole had 1,342 employees as at 5
April 2020 (2019: 1,355), of which 8.20% were women
(2019: 8.41%).
Large sections of our business rely on employing large numbers
of people with qualifications in science, technology, engineering
and mathematics (STEM) related fields. We, like others in similar
industries, face challenges recruiting female employees with
STEM qualifications and experience because there are
significantly fewer women who study and work in these fields.
We recognise we have more work to do, as the industry looks to
bring about change over the longer term.
Number
Percentage
Male
Female Male
Female
8%
Women
Directors (including
Non-Executive Directors) 6
Senior Management
Management
Staff
Skilled operatives
Apprentices
Trainees
Total
1
1
88
2
7
86%
88%
14%
13%
100% 0%
76%
24%
100% 0%
96%
4%
100% 0%
7
27
275
594
192
18
1119 99
92%
8%
20
TClarke Annual Report and Financial Statements 2020
Strategic Report
21
Health, Safety and Wellbeing
Customers and Suppliers
Robust, Innovative, and Highly
Productive Nationwide Safety Operation
Delivering for all our Stakeholders.
At TClarke, we are wholeheartedly committed to the health,
safety and wellbeing of our personnel and all those who have
any undertakings with the business.
We pride ourselves on our consistent approach to Health, Safety
and Wellbeing Management and we are proud of the culture we
have created and maintained.
Investment in our H&S Management Systems is continual to
ensure we remain industry leaders. This includes a collective
approach to innovation, Health, Safety and Wellbeing
awareness.
The Company is totally committed to the prevention of injury
and ill-health. We recognise that statutory regulations, codes
of practice client and industry rules will provide minimum
standards only, therefore wherever practicable we strive to
improve such standards.
5 Year Accident
Reduction
Continued and persistent focus
on accidents and incidents
Annual Group Accidents
2016 -2020
123
113
102
73
2017
2018
2019
47
2020
2016
2017
2018
2019
2020
Y O U S E E !
YOU SAY!
S W I T C H E D O N T O S A F E T Y
THANK
YOU!
Report a concern
Report a concern
Report a concern
Report a concern
Report a concern
Innovation
Innovation is key in refreshing our safety behaviour and culture.
We operate an ongoing cycle of innovation with new campaigns
and the extensive use of traditional and digital platforms in new
ways. 2020 saw a series of campaigns, practical safety
merchandise, materials and engagements. It also saw substantial
developments in the use of our digital staff portal Tommy to
communicate and support good practice. During the year we
also upgraded our industry leading ‘Have Your Say’ Safety and
incident reporting smartphone app.
Training
We operate a comprehensive range of internal and external
training programmes including a complete range of video
training materials which are reviewed constantly. We invest
heavily and systematically in the best training for our people.
Wellbeing
TClarke continuously aim to keep Health & Safety at the
forefront of everybody’s mind and do so by continuing to
implement our full range of well-established Health & Safety
initiatives. These initiatives include ‘Have Your Say’ which
focuses on drawing out Health & Safety topics and issues for
discussion, which encourages engagement and consultation
with the employees. The ‘You See You Say’ reporting card and
mobile phone app identify potential Health & Safety risks.
TClarke have a Mindful Worker initiative, supported by a mindful
worker campaign we are proud to have introduced Mental
Health First Aid training sessions across the Group to enable
staff to become qualified Mental Health First Aiders. Our Green
Hearts Mindfulness classes for all staff & supervisors have been
well attended and appreciated. The classes cover practical
breathing and meditation techniques which help to manage
stress. The classes were so successful that we have now created
a series of videos. These measures are a big step forward within
the construction industry and prove how serious TClarke is
about managing every aspect of our employees’ mental health,
health and wellbeing.
Procedures and Communications
At TClarke we have dedicated, professionally qualified regional
Health and Safety Departments. These teams deliver excellent
day to day control, oversight and action to ensure that our safety
standards and procedures are actively engaged with, enforced
and encouraged across our business. On a Group and Regional
basis we run an ongoing cycle of campaigns, tool box talks,
briefings and safety tours, supported with a full range of quality
communications tools.
Strong Relationships and Smart Systems
Ready for Sustainable Growth
Strong Engagement and Leadership
All our client relationships are underpinned by a systematic
programme of ongoing engagement. Only through this
ongoing collaboration can we continue to evolve as a business,
improve our ways of working and continue to meet or exceed
the expectations of our clients. TClarke’s structure and
organisation means that our executive leadership team has
direct, personal control and accountability for this engagement.
Delivering Increasing Value to our Customers
Our long history of total reliability, safety and delivery of quality
projects enables us to remain long term partners and the
contractor of choice for many clients. We operate a collaborative
and open approach to work which maximises value, efficiency
and productivity. As we increase our leadership in critical areas
of technology , manufacturing and our portfolio of engineering
specialisms, we keep pace with and in many cases are
anticipating our clients requirements.
An Efficient Unified Procurement Operation
Work we have done in recent years has added a series of
strategic benefits to our long-standing and effective supply
chain partnerships. Across the UK, the last year has shown
the value of having such a supportive and loyal group
of suppliers in helping to keep our clients
programmes on track, around the UK.
A Nationwide Precision Logistics Operation Focused
on Efficiency
The scale of our operation is considerable. Every day TClarke’s
nationwide procurement team ensures the correct delivery of
more than 100 orders nationwide. This is a precision logistics
operation, dovetailing with our clients’ operational
requirements. In the last years, as a dividend from group wide
structural improvements, we have streamlined and unified our
nationwide procurement team, including the introduction of a
new digital portal, dashboards, reporting tools and processes.
We have a new simplified approvals process for supply chain
membership and a streamlined procurement process which
gives our buying teams a stronger support community, better
information flows, access to deals and opportunity to
concentrate on value creation. We have also been able to
create new logistics efficiencies as we share resources,
knowledge and relationships across our UK team. In addition
to process improvements we are also able to drive increased
value through the scale of our Group purchasing.
TClarke is committed to compliance with the Modern Slavery
Act 2015 go to www.tclarke.co.uk/downloads for full policy.
Payables and
Receivables
Payroll
£72M
Serving 14,500
UK Projects
Procurement
£158M
Working
together
Derby Central
Processing Centre
Serving 19
Regional Offices
Central
Finance
Project
Registration
Invoicing and
Reconciliations
22
TClarke Annual Report and Financial Statements 2020
Strategic Report
23
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.
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. The principal
risks faced by the Group (including any emerging risks), and
the mitigating actions and controls in place to address these
risks, were reviewed by the Board in February 2021 and are
presented in the graphic below and on pages 23 to 25.
Following its review, the Board agreed that the ten principal
risks remained unchanged from the previous year.
The Group continues to monitor the impact of COVID-19
on its operations.
Group Principal Risks
L
i
k
e
l
i
h
o
o
d
P
r
o
b
a
b
e
l
P
o
s
s
i
b
e
l
I
m
p
r
o
b
a
b
e
l
Political, Economic and
Market Conditions
Pensions
Financial Strength
Health and Safety
Contract Delivery
Reputation
People and Skills
Winning New Work
Supply Chain
Cyber Security
Low
Medium
Impact
High
Risk
Strategy Impact
Mitigation
Movement
Political, Economic and Market Conditions
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
Sustainable balanced
business.
Increase technology
market share.
Build long-term, lasting
relationships.
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.
No Change
1. The Group continues to operate
throughout the UK using its core
engineering skills base to enable
agile movement in and out of sectors
to meet changing market demands.
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 contractor relationships and seeks
to secure framework agreements to
mitigate against demand fluctuations.
4. Cost and skills base are aligned to
reflect anticipated workload.
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.
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.
Sustainable balanced
business.
1. The Group’s defined benefit
scheme closed to new members
No Change
3% sustained
operating margin.
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.
Financial Strength
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.
Sustainable balanced
business.
Increase technology
market share.
No Change
1. The Group continues to operate
throughout the UK using its core
engineering skills base to enable
agile movement in and out of sectors
to meet changing market demands.
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 contractor relationships and seeks
to secure framework agreements to
mitigate against demand fluctuations.
4. The Group has a strong internal
controls framework and maintains
significant headroom in its cash and
banking facilities.
24
TClarke Annual Report and Financial Statements 2020
Strategic Report
25
Principal Risks continued
Risk
Strategy Impact
Mitigation
Movement
Risk
Strategy Impact
Mitigation
Movement
No Change
People and Skills
Attracting, retaining and developing
high-calibre staff and skilled
tradespeople are key to our ability
to deliver value for our stakeholders.
Sustainable balanced
business.
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.
Sustainable balanced
business.
Remain contractor
of choice.
Contract Delivery
The Group concurrently runs several
hundred contracts across the UK,
some of huge complexity. These
require high-quality, proactive
management to ensure delivery of
value objectives for all stakeholders.
The risk of non-availability of resource
and/or sites is increased during the
pandemic. Failure to deliver could
result in significant financial and
reputational damage.
Remain contractor
of choice.
Sustainable balanced
business.
Build long-term,
lasting relationships.
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.
6. Continued focus on ‘You See,
You Say.’
7. Introduction of Mindfulness
workshops.
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.
Increased
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.
Sustainable balanced
business.
No Change
1. The Group continues to operate
throughout the UK using its core
Engineering Services skills base to
enable agile movement in and out
of sectors to meet changing market
demands.
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.
No Change
No Change
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.
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 UK, 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.
No Change
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.
3. Whilst we are not experiencing any
post-Brexit challenge in respect of our
supply chain, we continue to monitor
events.
No Change
1. The Group maintains robust cyber
security policies to guard against
third-party access and malicious
attacks.
2. The Group’s core systems are
outsourced to a third party with
robust processes and procedures.
3. The Group maintains an access
control process.
Increase technology
market share.
Build long-term,
lasting relationships.
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.
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.
Sustainable balanced
business.
Build long-term,
lasting relationships.
Cyber Security
Cyber attack and data loss are a risk to
all organisations and individuals. The
Group handles sensitive information of
a personal, confidential and commercial
nature. Its business operations depend
upon its IT systems.
Sustainable balanced
business.
26
TClarke Annual Report and Financial Statements 2020
Governance
27
Long-term Viability Statement
Board of Directors
uncertainty, the Group’s response to the first national COVID
lockdown has demonstrated its ability to respond quickly to
changes in market conditions and remain profitable.
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 2023.
Strategic Report Approval
The Board confirms that, to the best of its knowledge, the
Strategic report on pages 1 to 26 includes a fair review of the
development and performance of the business and the position
of the Company, and the undertakings included on 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 24th March 2021.
Mark Lawrence
Group Chief Executive Officer
24th March 2021
The Directors have assessed the Group’s prospects and viability,
taking into account its current position and the principal risks
outlined on pages 22 to 25.
The nature of the Group’s business is long-term. 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 as most of the projects undertaken by the Group are
completed within a three year time horizon from initial tender
and 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 twelve
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 threats to the financial
viability of the Group over the three year projection period.
These sensitivities include changing assumptions with regard to
revenue and profit, including a repeat of the first national
lockdown where a large number of construction sites were
closed. 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 £10 million overdraft facility repayable on demand and a
committed £15 million revolving credit facility expiring on 31
August 2024, 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
reasonable sensitivities, the Group will be able to operate within
its existing facilities over the three year projection period, and the
Directors are confident that the Group’s business model allows
sufficient flexibility to meet any significant change in
demand for its services. Whilst the market conditions at present
are particularly challenging in view of the global COVID-19
pandemic and VAT changes add further layers of complexity and
Executive Directors
Mark Lawrence
Group Chief Executive Officer
Appointed to the Board on 2nd May 2003. Age 53.
Mark has been with the Company for 34 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.
Mike Crowder
Group Managing Director
Appointed to the Board on 1st January 2007. Age 56.
Mike has over 35 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 has 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.
Trevor Mitchell
Group Finance Director and Company Secretary
Appointed to the Board on 1st February 2018. Age 60.
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 an Executive Director of
It’s Purely Financial Limited.
Committees
Audit Committee
Nomination Committee
Remuneration Committee
Chair
Non-Executive Directors
Iain McCusker
Chairman
Nomination Committee Chairman
Appointed to the Board on 1st January 2009 and appointed
Chairman on 1st October 2015. Age 69. 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 Senior Visiting Fellow, City, University of
London and Chairman of NPA Insurance and a former
Non-Executive Director of Cripps LLP.
Mike Robson
Senior Independent Director
Audit Committee Chairman
Appointed to the Board on 18th November 2015. Age 60.
Mike is a Chartered Accountant with extensive experience of
audit, financial management and reporting, gained at PwC
and in industry. In a career including 28 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 is a Director of Azure Partners Ltd.
Peter Maskell
Independent Director
Remuneration Committee Chairman
Non-Executive Director for Employee Engagement
Appointed to the Board on 1st January 2018. Age 63.
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. In the last five
years, Peter managed the transformation of the lighting
business into a fully digital business offering. Peter is also a
Non-Executive member of the board of the University of Surrey.
Louise Dier
Independent Director
Appointed to the Board on 1st January 2019. Age 61.
Louise was previously Managing Director of London based
David Chipperfield Architects having joined them in 2013.
Prior to that, Louise was General Manager UK for DO & CO
Catering and Restaurants AG, a publicly listed Austrian
company, for four years. Louise studied law at Cambridge
University and was called to the bar, however she quickly moved
into management, spending nearly eight years at International
Management Group, the US based sports management group,
the last two years as head of HR for IMG Europe. Louise is also a
Trustee of the charity Sported.
28
TClarke Annual Report and Financial Statements 2020
Governance
29
Board of Directors continued
Corporate Governance Report
Group Management Board
The Group Management Board comprises the Executive Directors and:
Gary Jackson
UK North Director
Rob Faro
UK South Director
Garry Julyan
London Director
Kevin Mullen
UK North Director
Anton Malia
UK South Director
Mick Jobling
Group Human Resources Director
Andy Griffiths
Systems Director
Sally Higgins
Group Procurement Director
ABERDEEN
New office to open
in 2021
FALKIRK
DUMFRIES
UK NORTH
NEWCASTLE
LEEDS
LIVERPOOL
MANCHESTER
UK SOUTH
BIRMINGHAM
PETERBOROUGH
DERBY
HUNTINGDON
OXFORD
STANSTED
COLCHESTER
NEWPORT
PORTISHEAD
LONDON
SITTINGBOURNE
ST. AUSTELL
PLYMOUTH
LONDON
Chairman’s Introduction
The Board is committed to high standards of corporate
governance and complies with the principles contained in
the UK Corporate Governance Code 2018 (‘the Code’), which
took effect for accounting periods starting on or after 1st
January 2019. 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 has applied the principles
contained within the Code. Our statement of compliance with
section 172 of the Companies Act 2006 is set out on pages
14 to 15.
The Board recognises 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 page 27, 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.
Our culture is fundamental to the successful delivery of our
strategic 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
representatives of the regional businesses, details of whom
are provided on page 28.
During 2020, we undertook a formal, internal evaluation of
the Board’s and its committees’ effectiveness. The results of
this exercise are summarised on page 37. I am pleased to
report that I am satisfied that the Board and each of the
Directors are operating effectively. Mike Robson, Senior
Independent Director, has decided not to offer himself for
re-election at the 2021 AGM. I am therefore happy to
recommend that all Directors except Mike Robson standing
for re-election should be re-elected at the 2021 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
24th March 2021
30
TClarke Annual Report and Financial Statements 2020
Governance
31
Statement of Compliance
Statement of Compliance
Throughout the year ended 31st December 2020, the Board
considers that it has complied with the principles and
provisions of the UK Corporate Governance Code 2018
(‘the Code’), other than the tenure of the Chairman, which
is explained below. 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. The
Non-Executive Directors who served during the year ended
31st December 2020 were deemed to be independent,
notwithstanding their shareholdings held during the year,
which are not considered significant by the Board. At the
time of his appointment as Chairman, Iain McCusker was
considered to be independent, but is not considered to be
independent by virtue of his appointment as Chairman.
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, where necessary. The Senior Independent
Director is also an additional point of contact for shareholders
if they have reason for concern and where contact through
the normal channel of the Chairman, Chief Executive or other
Executive Directors has failed to resolve or for which such
contact is inappropriate.
All Directors are subject to annual re-election unless a
Director has been newly appointed during the year, when
they will seek election. At the forthcoming AGM on 5th May
2021, all Directors will be retiring and all, except Mike
Robson, are offering themselves for re-election.
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.
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.
All Executive Directors have signed service agreements which
take into account best practice and contain a notice period of
12 months from either party. All Non-Executive Directors have
letters of appointment specifying their roles, responsibilities
and required time commitment to the Board.
The Board maintains procedures whereby potential conflicts
of interests are reviewed regularly. The Board has considered
the other significant commitments undertaken by the
Directors, details of which are provided in their biographies
on page 27, and considers that the Chairman and each of the
Directors are able to devote sufficient time to fulfil the duties
required of them under the terms of their service agreements
or letters of appointment.
Iain McCusker was appointed Chairman in October 2015,
although he has been a Non-Executive Director since 2009.
The Board notes that the Code states that the Chair should
not remain in the post beyond nine years from the date of
first appointment to the Board, but provides that this period
may be extended to facilitate effective succession planning
and the development of a diverse Board, particularly in those
cases where the Chair was an existing Non-Executive Director
on appointment. Therefore, in order to provide continuity
and stability given the relative short periods of office of the
other Non-Executive Directors, Iain McCusker will stand for
re-election at the 2021 AGM and his position as Chairman
will be kept under review.
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, its businesses and its culture. 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, whilst taking account of
the interests of all stakeholders. 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 as recommended by the Nomination
Committee.
• Establishing committees of the Board and determining
their terms of reference.
The Board meets formally once a month (other than August)
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 in the table below. There
were 5 additional board meetings as part of TClarke’s response
to the pandemic.
At each Board meeting 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.
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 Investor
section of the Company’s website.
The Board also established an Administration Committee at
its Board meeting in January 2019 to which it delegated items
of a routine and administrative nature. The Committee meets
as and when required and is constituted by any two or more
Directors. It met 4 times during 2020 to deal with the exercise
of options under the TClarke Savings Related Share
Option Scheme.
Number of Meetings Attended by the Directors
Iain McCusker
Mike Robson
Peter Maskell
Louise Dier
Mark Lawrence
Trevor Mitchell
Mike Crowder
Board
(Maximum 15)
Audit
(Maximum 5)
Nomination
(Maximum 1)
Remuneration
(Maximum 7)
15
15
15
15
15
15
15
–
5
5
5
–
–
–
1
1
1
1
–
–
–
7
7
7
7
–
–
–
32
TClarke Annual Report and Financial Statements 2020
Governance
33
Statement of Compliance continued
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
co-ordinate and direct the efforts of the three regional
businesses and the individual offices below them to manage
risk and deliver value for the Group as a whole across our
target sectors in line with the Group’s strategy. The Group
Management Board considers Group initiatives on matters
such as health and safety, procurement, employee
engagement, 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.
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 and Chief
Executive Officer 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.
During the year, the Board conducted its annual 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 is responsible for advising the
Board on all governance matters and 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 in order to
understand their views on governance and performance
against strategy.
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. The Company also presented to a
major private investor event during the year and Mark
Lawrence and Trevor Mitchell were available throughout the
day to meet with private investors.
The Board has always invited communication from
shareholders 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, during the
meeting and remain available after the meeting to talk
informally with shareholders. 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 in the
Investor section of the Company’s website.
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.
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 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 by the
Group Management Board.
The Audit Committee reviews the Company’s risk register
and monitors risk management procedures as a regular
agenda item and receives reports thereon from Group
management. The Audit Committee Chairman provides a
report on its findings to the Board. The emphasis is on
obtaining the relevant degree of assurance and not merely
reporting by exception.
At its meeting on 24th February 2021, the Board carried out
the annual internal controls and risk management assessment
by considering documentation from the Audit Committee.
In accordance with the Code, the Board confirms that, for the
year ended 31st December 2020, 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 22 to 25.
Further details concerning the Audit Committee’s review of
internal controls and risk management processes are included
in the Audit Committee report on pages 34 to 36. Historically,
the internal audit function has been covered through regular
site visits conducted by Quality Assurance and Group finance
personnel and the role was expanded in 2018 to include
detailed reviews that the Committee felt appropriate. The
Audit Committee reviewed the need for a separate internal
audit function during 2020 and agreed that the current
process worked well and should continue.
Share Capital Structures
The statements within the Directors’ report on share capital
structures are incorporated by reference into this statement
of compliance.
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 provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy and concluded that this is the
case. A statement to this effect is included in the Directors’
Responsibilities Statement on page 58. 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 58.
Long-term Viability Statement (‘LTVS’)
In relation to compliance with the Code, the Board has
assessed the prospects of the Group, taking into account the
Group’s current position and principal risks. The LTVS and
supporting assumptions are set out on page 26.
Trevor Mitchell
Company Secretary
24th March 2021
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TClarke Annual Report and Financial Statements 2020
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35
Audit Committee Report
Dear Shareholder
As Chairman of the Audit Committee, I am pleased to
present the report of the Audit Committee for the year
ended 31st December 2020.
Matters Considered by the Audit Committee
The Audit Committee met on five occasions during the year
ended 31st December 2020. The principal matters discussed
at the meetings are set out below.
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:
The Audit Committee continues to support the Board by
providing detailed scrutiny of 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.
The Committee’s work has also focused on undertaking a
statutory audit tender process as PricewaterhouseCoopers
LLP will have completed ten years as auditor at the end of
the 2020 financial year. The process was very thorough,
beginning in July 2020 and concluding at the end of
November. The Committee was pleased with the strong
quality of presentations recieved from each of the
participating audit firms. The Committee unanimously
agreed to recommend that the Board reappoint
PricewaterhouseCoopers LLP as auditor subject to
shareholder approval at the AGM on 5th May 2021.
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
24th March 2021
Principal Matters Considered
February 2020
• Draft Annual Report and Financial Statements for the
year ended 31st December 2019, including significant
judgements and disclosures therein.
• Annual assessment of internal controls and risk
management.
• Finance Director’s report on going concern and
viability statement.
• Finance Director’s report on goodwill impairment.
• Interim report of external auditors detailing their
assessment on key risk audit areas.
• Consideration of, and agreement to the audit exemption
of certain subsidiaries.
• Review of Committee’s terms of reference.
• Review of Committee’s effectiveness.
• Review of risk register and mitigating actions.
• Consideration of the internal audit work carried out
by the Quality Assurance team.
March 2020
• Draft Annual Report and Financial Statements for the
year ended 31st December 2019, including significant
judgements and disclosures therein.
• Audit representation letter.
• Report of external auditors on their audit of the 2019
Annual report and Financial Statements.
• Consideration of the reappointment of external auditors.
• Independence of external auditors.
September 2020
• Consideration of the internal audit work carried out by
the Quality Assurance team.
• Review of risk register and mitigating actions.
• 2019 external audit evaluation.
• 2021 Audit tender update.
• Consideration of the need for a separate internal audit
function.
October 2020
• Audit plan presented by the external auditors.
• Governance and independence of the external auditors.
• Consideration of the need for a separate internal
audit function.
• Review of policy on non-audit services.
• Update on 2021 Audit tender
November 2020
• Review of 2021 audit tender proposals
• Select preferred auditor to be approved by shareholders
at 2021 AGM.
Matters Considered and Actions
Matter Considered:
Contract Profit and
Revenue Recognition
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:
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;
• expected return on plan assets.
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 Group Finance Director supporting management’s
assertion that goodwill is not impaired. Other
intangible assets comprise customer relationships
on acquisition and are amortised. 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 considered the consistency
and appropriateness of the Group’s policies
and the effect of IFRS 15 in respect of profit
and revenue. Their specific application to a
number of large contracts was considered.
The Committee concurred with
management’s assessment of the contracts
and the revenue recognised.
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 23 to the
financial statements on pages 98 to 102.
The Committee agreed with management’s
recommendation that no impairment
charge should be made. Further details
concerning the make-up of intangible
assets, the assumptions used and the
sensitivity of the carrying value of intangible
assets can be found in note 11 to the
financial statements on pages 87 to 88.
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.
Matter Considered:
Going Concern
Action: The Group conducts a review to ensure it
has sufficient working capital to support its 3 year
business plan. The review considers impact on
working capital requirements of various sensitivities
to ensure that plans are sufficiently robust to cater for
reasonable worst case scenarios whilst still meeting
all bank covenants.
The Committee agreed with management’s
recommendation that the Group is a going
concern. On all scenarios modelled the
Group was able to meet all banking
covenants with significant headroom.
Further details can be found in the long
term viability statement on page 26.
The Committee considered the papers presented
by the Group Finance Director supporting
management’s assertion that the Group remains a
going concern and has sufficient working capital to
support its business plans.
Membership of the Audit Committee
The members of the Committee during the year were Mike Robson (Chair), Peter Maskell and Louise Dier. Biographies of the
current members of the Audit Committee are included on page 27.
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TClarke Annual Report and Financial Statements 2020
Governance
37
independence and objectivity is safeguarded by limiting the
nature and value of non-audit services performed by the
external auditors and ensuring the rotation of the lead
engagement partner at least every five years. The current
lead engagement partner has held the position for four years.
The last external audit tender process was in 2011 when PwC
were initially appointed and they have been the auditors
since. The Audit Committee has undertaken an external audit
tender process in 2020 and has recommended that PwC be
reappointed for the 2021 external audit.
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.
Mike Robson
Chair of the Audit Committee
24th March 2021
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.
Audit Committee Report continued
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 and the Committee
as a whole has competence relevant to the construction
industry. The Committee routinely meets four times a year,
and additionally as required, to review or discuss other
significant matters.
The Group Finance Director and the Group Chief Executive
Officer attend the meetings; 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 – Governance.
Internal Controls
The Audit Committee receives regular updates on internal
controls and has concluded that our controls are adequate
and appropriate to our business. Following an independent
review of the controls over expenses a number of changes
and improvements have been made to the expenses policy
and processes.
Internal Audit
The internal audit function is covered through regular site
visits conducted by Quality Assurance and Group finance
personnel and the remit of the Quality Assurance department
was expanded in 2018 to include detailed reviews that the
Committee felt appropriate. The Audit Committee reviewed
the need for a separate internal audit function during the year
and agreed that the current practice worked well and was
appropriate to our business.
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 83.
The Committee accepts in principle that certain work of a
non-audit nature is most efficiently undertaken by the
external auditors. The policy on non-audit services provided
by PricewaterhouseCoopers LLP (‘PwC’) is that the Chairman
of the Audit Committee reviews and, if appropriate, approves
all non-audit services and fees, and any such approval is put
to the Audit Committee for review and ratification at the next
Committee meeting. The auditors’ fees for non-audit services
during the year were £nil (2019: £nil).
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
Nomination Committee Report
As part of the evaluation process, as Chairman of the
Nomination Committee and acting in conjunction with the
Chief Executive Officer, I undertook the task of annual
evaluation of performance and commitment of individual
Board members by conducting individual interviews. The
review of my own performance and commitment was
undertaken by the Senior Independent Director.
Based upon the evaluation of the Board, its committees and
the continued effective performance of individual Directors,
the Committee recommended to the Board that the Directors
stand for re-election at the Company’s AGM in 2021.
Iain McCusker
Chair of the Nomination Committee
24th March 2021
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 senior management, 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.
Dear Shareholder
As Chairman of the Nomination Committee, I am pleased to
present the report of the Nomination Committee for the year
ended 31st December 2020.
During the year, the Nomination Committee comprised Iain
McCusker (Chair), Peter Maskell, Mike Robson and Louise
Dier. Biographies of the current members of the Nomination
Committee are included on page 27.
The Nomination Committee met once during the year to
review the structure, size and composition of the Board and
its Committees, undertake a Board evaluation process and
to consider succession planning for Directors and senior
management. As part of its succession planning this year the
Committee formulated a plan to facilitate an orderly
succession for the position of Chairman.
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 Committee’s succession planning not only takes into
consideration the Company’s long-term and medium-term
needs and natural evolution to the Board, but also short-term
needs such as unforeseen departures and contingency for
unexpected Board changes. The Committee also formulated
succession plans for the Group Management Board taking
into account the challenges and opportunities facing the
Company, and the skills and expertise needed on the Board
in the future.
Mike Robson, Senior Independent Director, has decided not
to offer himself for re-election at the 2021 AGM. Mike joined
the Board in 2015 and has provided enormous support and
good counsel to the Board throughout his tenure. He leaves
TClarke with our very best wishes for the future.
The performance of individual Directors, the Board, its
committees and the Chairman is reviewed annually. In 2020, 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 and
subsequently shared with and discussed by the Board.
Topics covered in the review included strategy, risk
management and the conduct and effectiveness of Board
meetings. Whilst acknowledging that there are always
opportunities for development and improvement, the Directors
have concluded that the Board had effectively discharged its
duties during the year.
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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 95% approval of
the Directors’ remuneration report received last year at the
2020 AGM. We hope that we will continue to receive your
support at the forthcoming AGM in 2021.
Peter Maskell
Chair of Remuneration Committee
24th March 2021
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.
Remuneration Committee Report
Dear Shareholder
I am pleased to present the remuneration report for the year to
31st December 2020. This report aims to set out how the Group
pays our Directors, decisions made on their pay and how much
they have received in the last financial year.
The report is split into two sections:
• A summary of the Directors’ Remuneration Policy, which
was approved at the AGM 24 June 2020 and which is
reproduced this year for information purposes only, as it
is unchanged.
• The Annual Report on Remuneration, which includes
this letter and will be subject to an advisory shareholder
vote at our AGM on 5 May 2021.
Performance and Reward for 2020
2020 was a remarkable year for the Group in the face of the
most difficult of trading conditions resulting from the Pandemic.
Parts of the country were locked down for many months with
several sites closed for extended periods. In spite of this TClarke
recorded an underlying operating profit before interest and
tax of £6m; paid the 2019 dividend in full to shareholders and
maintained its interim dividend; maintained its deficit reduction
payments for the defined benefit pension scheme and has easily
passed all its bank covenant tests.
2020
2019
Revenue
Underlying operating profit
Underlying EPS
Dividend per share
£231.9m
£6.0m
10.29p
4.4p
£334.6m
£10.2m
18.81p
4.4p
The Executive Directors’ targets were set by the
Remuneration Committee at the start of the first national
lockdown in March 2020. Financial performance of TClarke
combined with and the performance of the Executive Directors
in executing against the strategic annual bonus objectives set
for them would have resulted in a bonus of 111% being payable
to each of the Executive Directors. The Executive Directors have
requested that the Committee reduce this to 45% in recognition
of the difficult year that the Group’s staff have been through.
The Committee believes this is a fair outcome.
LTIP awards granted in 2018, which vest on three year
performance to 31 December 2020, will vest in full. The
Committee used its discretion to impute a 3% underlying
operating profit for Q2 2020 ; 3% being achieved for 2019 and
Q1, Q3 and Q4 2020. On this basis earnings per share growth
over the three-year period to 31st December 2020 was 16%.
This was above the stretch vesting condition of EPS growth
exceeding RPI by more than 10% for the LTIP award granted in
2018 and, as a result, the award will vest in full on 25th
April 2021.
LTIP awards granted in 2020 contained a performance condition
that was assessed by the Committee on 23 March 2021. The
Committee assessed that the performance condition relating to
increase in reserves had been met as profit after tax was £1.2m.
Further information on the actual targets set, and performance
against them, is provided on page 50.
Remuneration Policy
The Committee expects the 2020 remuneration policy to
remain effective until the 2023 AGM. Our remuneration policy
is designed to be sustainable and simple, and to encourage the
effective stewardship that is vital to delivering our strategy of
creating long-term value for all stakeholders. It promotes long
term sustainable performance through significant deferral of
remuneration through shares. Executive Directors are expected
to build and maintain substantial personal shareholdings in the
business. 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 targets
based on measures aligned with our long-term strategy.
Implementation of the Remuneration Policy for 2021
The key highlights of how we intend to apply it for
2021 are:
• Fixed Pay – there was 0% increase in Executive Directors base
salaries on 1 January 2021 in line with the wider workforce.
No changes have been made to the benefit provision.
• Variable pay – annual bonus maximum will be 150% of salary
and a normal LTIP award of 50% of salary will be made in April
2021. An additional LTIP award of 50% of salary will also be
made as an incentive to support the £500 million revenue
growth plan; the achievement of which would substantially
increase earnings per share.
• Performance measures – will continue to be focused on
simple and transparent measures. For the annual bonus,
underlying profit before tax and interest 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 the financial year 2023.
• Employee share schemes: Long-Term Incentive Plan, Save As
You Earn Share Option Scheme – Shareholders approved the
employee share scheme on 13 May 2011 for a 10 year period.
Resolutions to approve the Long-Term Incentive Plan
and Save As You Earn Share Option Scheme are proposed
as ordinary resolutions numbers 10 and 11 for another 10
year period.
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TClarke Annual Report and Financial Statements 2020
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Directors’ Remuneration Policy
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. Reflecting the
UK Corporate Governance Code and investor guidelines, new
external Executive Director appointees will also have company
pension contributions set in line with the level offered to the
majority of the salaried workforce (in percentage of salary terms).
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.
This part of the Directors’ remuneration report summarises the
Directors’ Remuneration Policy for the Company which was
approved by the shareholders at the 2020 AGM.The policy
came into effect on the 24th June 2020 and is next due to be
put to the shareholders for approval at the 2023 AGM.
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 their
size (and in particular their FTSE ranking) 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, as well as an annual bonus plan and shares
awarded under a long-term incentive plan (‘LTIP’), both of
which are subject to stretching performance conditions.
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.
Summary Director Policy Table
The table below summarises the remuneration policy
for Directors.
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
Operation
• Normally reviewed annually with changes typically effective
1st January
• Paid in cash on a monthly basis
• Comparison against companies with similar characteristics are
taken into account as part of the 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 support 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
• Travel allowances or time-limited relocation benefits
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
Maximum Opportunity
• 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 47
• 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
and the wider business context is considered as part of the
salary review process
Maximum Opportunity
• 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 HMRC
Performance Targets
• Not applicable
42
TClarke Annual Report and Financial Statements 2020
Governance
43
Directors’ Remuneration Policy continued
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
Maximum Opportunity
• For Executive Directors appointed externally from 1
January 2020, defined contribution pension contributions
(or cash equivalents in lieu) will be aligned with the wider
salaried staff
• Current employees, including Executive Directors, 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 and these rates are consistent for all
participants. 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 or if the individual opts-out
of the plan
Performance Targets
• Not applicable
Element of Remuneration: Bonus
Purpose and Link to Strategy
• Incentivise annual achievement of performance targets
relating to the Company’s KPIs
• Maximum bonus only payable for achieving demanding
Maximum Opportunity
• Maximum of 150% of salary per annum
• Target performance would normally result in 60% of
maximum becoming payable
targets
Operation
• Normally payable in cash
• 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 (within the limits of the scheme) to ensure that
overall bonus payments reflect its view of corporate
performance during the year
• Payments in relation to the annual bonus are subject to
withholding and recovery provisions
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
Element of Remuneration: Long-Term Incentive Plan
Purpose and Link to Strategy
• Aligned to delivery of strategy and long-term
value creation
• Align Executive Directors’ interests with those of
Maximum Opportunity
• Annual awards of no more than 100% of salary (with this
level generally reserved for exceptional circumstances).
Performance Targets
• Performance is measured over three years
• 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 (within the
scheme limits) 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
shareholders
• To promote retention
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 three years’ subject to the achievement
of pre-set performance criteria and continued employment.
Awards made from 2020 onwards are subject to a
mandatory two-year holding period following the end of the
vesting period, other than those sold to cover tax and NI
liabilities and dealing costs
• 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 release date may
become payable; any amount payable may assume the
reinvestment of dividends over the period
• Awards under the LTIP are subject to withholding and
recovery provisions, further details of which are included as
a note to the policy table
Element of Remuneration: Share Ownership Guidelines
Purpose and Link to Strategy
• To increase alignment between Executives and
shareholders
Operation
• Executive Directors are required to build and maintain
a shareholding of 100,000 shares through the retention
of vested share awards or through open market purchases
• Wholly owned shares and vested LTIP shares in the
mandatory holding period (net of tax) will count towards
the guideline
Maximum Opportunity
• Not applicable
Performance Targets
• Not applicable
44
TClarke Annual Report and Financial Statements 2020
Governance
45
Directors’ Remuneration Policy continued
Element of Remuneration: Post-employment Share Ownership Guidelines
Purpose and Link to Strategy
• To provide further long-term alignment between Executives
and shareholders
• To ensure a focus on successful succession planning
Maximum Opportunity
• Not applicable
Performance Targets
• Not applicable
Operation
• Executive Directors will normally be expected to maintain
a holding of TClarke shares for two years after their
employment as a Director has ceased
• The post-employment guideline will be equal to the lower of:
the actual shareholding at the time of ceasing to be a
Director and 100,000 shares
• The guideline will apply only to shares acquired from LTIP
awards made from 2020 onwards; open market purchases
are excluded from the post-employment guidelines
• The specific application of the shareholding guideline will be
at the Committee’s discretion
Element of Remuneration: Non-Executive Director
Purpose and Link to Strategy
• To provide competitive fees to attract and retain high-calibre
Non-Executive Directors
• To reflect the time commitment and responsibilities of
the role
Maximum Opportunity
• There is no prescribed maximum fee or fee increase
• 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
Operation
• The Chairman’s fee is set by the Board on the
Performance Targets
• Not applicable
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 2021 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 a 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. Targets are generally set with reference to the Group’s budget, with target performance typically requiring meaningful
improvement on the previous year’s outturn.
2 The performance condition applicable to the 2021 LTIP awards is earnings per share growth (EPS). 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.
LTIP targets are intended to be stretching but achievable taking into account the Group’s long-term strategic plan, as well as a range of relevant internal and external reference points.
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 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. Notwithstanding the above, pension arrangements for new appointees after 1 January
2020 will be consistent with the wider workforce.
5 Consistent with HMRC legislation and market practice, the HMRC all-employee share plans do not have performance conditions.
6 The annual bonus and LTIP include withholding and recovery provisions which may be applied in certain circumstances, including following a material misstatement of the Company’s financial accounts, gross misconduct
on the part of the award-holder or an error in calculating the award outcome. The 2020 annual bonus and awards made under the LTIP from 2020 onwards will be subject to an expanded list of triggers. In respect of
the annual bonus, the provisions apply for up to two years following payment, whilst LTIP awards remain subject to the provisions throughout the vesting and holding period (where applicable). Participants in both
schemes are now required to acknowledge their understanding of the withholding and recovery provisions to help ensure that the provisions would be enforceable the circumstances arise.
this element of pay at 150% of salary) the indicative total
remuneration value would be £1,700,168 for the Group Chief
Executive, £1,459,226 for the Group Managing Director and
£1,266,218 for the Group Finance Director.
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.
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 over a period of two to three
years once expertise and performance has been proven and
sustained.
New appointees would receive company pension contributions
or an equivalent cash supplement aligned to that offered to the
wider salaried workforce at the time of appointment, and would
be eligible to receive benefits of the same type and at similar
levels as other Executive Directors. If the new appointee were
promoted from within the business and was already a member
of the defined benefit scheme, they would remain eligible for
benefits from it in the same way as other members of the
workforce who are members.
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, expected value and performance tests.
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), whilst the maximum annual bonus in the
year of appointment would generally be pro-rated to reflect the
period of service during the year.
Pay for Performance Scenarios
The charts below provide an illustration of the potential
future reward opportunities for the Executive Directors, and
the potential split between the different elements of
remuneration under four different performance scenarios:
‘Minimum’, ‘Target’, ‘Maximum’ and ‘Maximum including the
impact of a 50% share price appreciation on LTIP awards’.
Potential reward opportunities are based on TClarke’s
remuneration policy, applied to the base salaries effective 1
January 2021. The annual bonus and LTIP are based on the
maximum opportunities set out under the remuneration policy
for normal circumstances; being 150% of salary and 50% of
salary respectively. Note that the LTIP awards granted in a year
do not normally vest until the third anniversary of the date of
grant, and the projected value is based on the face value at
award rather than vesting (i.e. the scenarios exclude the impact
of any share price movement over the period).
Mark Lawrence
Minimum
fixed pay
100%
Annual
Bonus
long-term
incentives
Target
Minimum
51%
100%
Maximum
Target
34%
51%
43%
49%
43%
6%
6%
16%
2021
£440
Total
£869
£444,668
£1,277
£873,631
Maximum
0
30%
300
Mike Crowder
42%
600
£000s
900
28%
1,200
1,500
£1,490,918
Minimum
fixed pay
100%
Annual
Bonus
long-term
incentives
Target
Minimum
51%
100%
Maximum
Target
34%
51%
43%
49%
43%
6%
6%
16%
2021
£440
Total
£869
£388,226
£1,277
£754,151
Maximum
0
30%
300
Trevor Mitchell
42%
600
£000s
900
28%
1,200
1,500
£1,280,726
Minimum
fixed pay
100%
Annual
Bonus
long-term
incentives
Target
Minimum
51%
100%
Maximum
Target
34%
51%
43%
49%
43%
6%
6%
16%
2021
£440
Total
£869
£332,093
£1,277
£651,252
Maximum
0
30%
300
42%
600
£000s
900
28%
1,200
1,500
£1,110,530
The ‘minimum’ scenario reflects base salary, pension and
benefits (i.e. fixed remuneration) which are the main elements
of the Executive Director remuneration packages not linked
to performance.
The ‘target’ scenario reflects fixed remuneration as above,
plus a bonus payout of 60% of maximum and LTIP threshold
vesting at 25% of maximum award.
The ‘maximum’ scenario includes fixed remuneration and full
payout of all incentives (150% of salary under the annual
bonus and 100% of salary under the LTIP). Under the
‘maximum’ scenario, if TClarke share price increased by 50%
over the three-year performance period ( in effect valuing
46
TClarke Annual Report and Financial Statements 2020
Governance
47
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 2020
Executive:
Mark Lawrence
Mike Crowder
Trevor Mitchell
Non-Executive:
Iain McCusker
Mike Robson
Peter Maskell
Louise Dier
Year ended 31st December 2019
Executive:
Mark Lawrence
Mike Crowder
Trevor Mitchell
Non-Executive:
Iain McCusker
Mike Robson
Peter Maskell
Louise Dier
Total salary
and fees
£
Taxable
benefits
£
Annual
bonus
£
Long-term
incentives
£
Pension
related
benefits
£
418,500
357,000
311,375
26,168
31,226
20,718
188,325
160,650
140,119
166,153
141,765
123,596
97,000
56,200
56,200
51,200
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£
799,146
690,641
595,808
97,000
56,200
56,200
51,200
Total salary
and fees
£
313,875
267,800
293,500
65,850
48,775
48,775
48,775
Taxable
benefits
£
21,177
21,177
20,718
–
–
–
–
Annual
bonus
£
Long-term
incentives
£
Pension
related
benefits
£
Total
£
369,274
315,067
274,713
117,082
101,810
–
315,824
336,733
–
1,137,232
1,042,587
588,931
–
–
–
–
–
–
–
–
–
–
–
–
65,850
48,775
48,775
48,775
Directors’ Remuneration Policy continued
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 and the Committee shall determine the extent to which
outstanding awards shall vest. Awards may alternatively be
exchanged for new equivalent awards in the acquirer where
appropriate. 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.
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.
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.
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. Awards subject
to a holding period will normally be released following
completion of the holding period. Under the plan rules, the
Remuneration Committee has overarching 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.
48
TClarke Annual Report and Financial Statements 2020
Governance
49
Annual Report on Remuneration continued
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
Annual bonus
The taxable value of benefits received in the year. These are a car or car allowance and private
medical insurance.
The 2020 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 actual performance of £6m underlying operating profit resulted in 100% of maximum for
this element being payable.
The measures selected for strategic objectives 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. Performance
against strategic objectives resulted in 22% of maximum for this element being payable.
Overall this resulted in a bonus of 111% of salary (maximum 150%) for Mark Lawrence,
Mike Crowder and Trevor Mitchell being payable. The Executive Directors have requested this
be reduced to 45% of salary for 2020 performance period.
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 2020 this includes the 2018 Conditional shares awards
which will vest in full on 25th April 2021. The value is based on the 3-month average share
price ending 31 December 2020 of 91.5p The performance conditions are detailed on page
50. EPS growth over the three-year period to 31st December 2020 was 16% after the
Remuneration Committee imputed 3% underlying operating margin for Q2 2020.
Long-term incentives
Pension-related benefits
The Directors received no pension benefits in 2020.
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 current MSR for the Executive Directors
whereby each Executive Director is required to build and maintain a holding of 100,000 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 2020 and 31st December 2019 were:
Mark Lawrence
Mike Crowder
Trevor Mitchell
Iain McCusker
Mike Robson
Peter Maskell
Louise Dier
At
31st December 2020
10p Ordinary shares
At
31st December 2019
10p Ordinary shares
Outstanding
conditional
share awards1
Outstanding
options held
under SAYE
MSR achieved at
31st December 2020
217,834
201,177
142,000
2,000
6,000
41,500
2,000
151,467
143,467
142,000
2,000
3,000
41,500
2,000
740,533
631,759
550,886
–
–
–
–
4,807
4,807
4,807
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
1 The outstanding conditional share awards are subject to performance conditions.
There have been no changes to Directors’ interests since 31st December 2020.
The Directors’ interests over shares as a result of their participation in the TClarke Equity Incentive Plan (‘EIP’) are as follows:
Award date
01/01/2020
Number
Granted
Exercised
Lapsed
31/12/2020
Number
Exercise
price
Earliest date
of exercise
Date of
expiry
Mark Lawrence
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Mike Crowder
Conditional shares
Conditional shares
Conditional shares
Conditional shares
Trevor Mitchell
Conditional shares
Conditional shares
Conditional shares
08/05/2017
25/04/2018
24/04/2019
01/05/2020
08/05/2017
25/04/2018
24/04/2019
01/05/2020
115,000
181,588
119,344
–
100,000
154,934
101,825
–
–
–
–
439,601
(115,000)
–
–
–
–
–
–
375,000
(100,000)
–
–
–
25/04/2018
24/04/2019
01/05/2020
135,078
88,783
–
–
–
327,025
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
181,588
119,344
439,601
0
154,934
101,825
375,000
135,078
88,783
327,025
– 08/05/2020 08/05/2027
– 25/04/2021 25/04/2028
– 24/04/2022 24/04/2029
– 01/05/2023 01/05/2030
– 08/05/2020 08/05/2027
– 25/04/2021 25/04/2028
– 24/04/2022 24/04/2029
– 01/05/2023 01/05/2030
– 25/04/2021 25/04/2028
– 24/04/2022 24/04/2029
– 01/05/2023 01/05/2030
50
TClarke Annual Report and Financial Statements 2020
Governance
51
Annual Report on Remuneration continued
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.
For the 2018, 2019 and 50% of the 2020 awards, the following performance conditions apply:
Annual growth rate 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 The base point is based on average underlying EPS for the three years ending with the year preceding date of grant.
The remaining 50% of the 2020 award performance conditions relate to the actions taken by the Executive Directors to enable TClarke
to increase retained reserves for the year ended 31 December 2020 (excluding any impact from Pension Deficit Movements). The
Remuneration Committee assessed that the performance condition had been met as the 2020 profit after tax was £1.2m. For the
shares to vest the Company must not breach any banking covenants for the remainder of the three year period.
The Directors’ interests in the TClarke Savings Related Share Option Scheme (‘SAYE Scheme’) are as follows:
Award date
01/01/2020
Number
Granted
Lapsed
Exercised
31/12/2020
Number
Exercise
price
Earliest date
of exercise
Date of
expiry
Mark Lawrence
24/10/2018
Mike Crowder
24/10/2018
Trevor Mitchell
24/10/2018
4,807
4,807
4,807
–
–
–
–
–
–
–
–
–
4,807
4,807
4,807
74.88p 01/12/2021 31/05/2022
74.88p 01/12/2021 31/05/2022
74.88p 01/12/2021 31/05/2022
The market price of a 10p Ordinary share on 31st December 2020 (being the last day of trading of 2020) was 97.6p and the range
during the year ended 31st December 2020 was 73p to 137p.
External Appointments
Mark Lawrence and Mike Crowder do not hold any external appointments. Trevor Mitchell is an Executive Director of It’s Purely
Financial Limited.
Pensions
At 31 December 2020 none of the Directors were members of the Company pension scheme.
Performance Graph
The graph below shows the total shareholder return that would have been obtained over the past ten years by investing £100 in shares
of TClarke plc on 31st December 2011 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 2011–2020
300
250
200
150
100
50
0
January
2011
January
2012
January
2013
January
2014
January
2015
January
2016
January
2017
January
2018
January
2019
January
2020
FTSE All-Share
FTSE All-Share/Construction & Materials – SEC
TClarke plc
FTSE AIM All Share / Construction & Materials – SS
Total Remuneration (Audited)
The total remuneration figures for the Group Chief Executive Officer during each of the last ten 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 (%)
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
875
69%
100%
2018
1,056
100%
100%
2019
1,137
78%
100%
2020
799
30%
100%
Ratio of Chief Executive’s Remuneration Relative to all UK Employees
The table below shows the ratio of the Group Chief Executive Officer’s single total figure of remuneration compared to all UK
employees at the 25th percentile, median and 75th percentile. The method used for the calculation is Option C. Three employees
were identified at each percentile from the list of all full time employees in the UK. The report will build up over time to show a ten year
period on each year accompanied by narrative to explain any movements.
2020
2019
Remuneration (£)
Pay Ratio
Remuneration (£)
Pay Ratio
Group Chief Executive Officer
25th Percentile
Median
75th Percentile
799,146
30,710
41,662
57,975
26:1
19:1
14:1
1,146,650
29,719
43,575
66,192
39:1
26:1
17:1
52
TClarke Annual Report and Financial Statements 2020
Governance
53
Annual Report on Remuneration continued
Percentage Change in Chief Executive’s Remuneration
The table below shows the percentage change in the Group Chief Executive Officer’s salary, benefits and annual bonus between the
financial year ended 31st December 2019 and 31st December 2020, compared with that of the total amounts for all UK employees of
the Group for each of these elements of pay
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
24th June 2020:
Salary:
Group Chief Executive Officer
UK employee average
Benefits:
Group Chief Executive Officer
UK employee average
Annual bonus:
Group Chief Executive Officer
UK employee average
Average number of UK employees
2020
£k
2019
£k
Change
418.5
44.6
26.2
2.0
188.3
1.94
1,294
313.9
50.0
21.2
1.2
369.3
2.25
1,389
33%
-11%
24%
67%
-55%
-13%
Relative Importance of Spend on Pay
The following table illustrates the year-on-year change in total remuneration for all employees in the Group relative to dividends and
total operating expenses. Total operating expenses comprise cost of sales and administrative expenses before amortisation of
intangible assets and other non-underlying costs.
Staff costs
Dividends
Total operating expenses
2020
£m
72.0
1.9
225.9
2019
£m
79.9
1.7
324.4
Change
-10%
12%
-30%
Service Contracts and Letters of Appointment
All Executive Directors have 12-month notice periods from the Company (and 12 months from the Executive Director) in accordance
with their service agreements.
Non-Executive Directors have letters of appointment which include initial terms of three years.
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.
During the year, the Remuneration Committee comprised Peter Maskell (Chair), Iain McCusker, Mike Robson and Louise Dier.
Biographical information on the Committee members and details of attendance at the Remuneration Committee’s meetings during the
year are set out on pages 27 and 31 respectively.
Resolution
Votes for/
discretionary
% of vote
Votes
against
Approval of Directors’ remuneration report
10,162,537
95.65%
461,976
% of vote
4.35%
Votes
withheld
17,149
Implementation of the Remuneration Policy for the year ending 31st December 2021
A summary of how the Directors’ Remuneration Policy will be applied during the year ending 31st December 2021 is set out below.
Mark Lawrence
Mike Crowder
Trevor Mitchell
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
2021
Basic salary
£418,500
£418,500
£418,500
£357,000
£357,000
£357,000
£311,375
£311,375
£311,375
Other*
Total
2020
Basic salary
Other*
Total
Change in
Total pay
£26,168
£455,131
£1,072,418
£31,226
£397,151
£923,726
£20,718
£339,877
£799,155
£444,668
£873,631
£1,490,918
£388,226
£754,151
£1,280,726
£332,093
£651,252
£1,110,530
£444,668
£26,168
£418,500
£873,631
£455,131
£418,500
£418,500 £1,072,418 £1,490,918
£357,000
£357,000
£357,000
£311,375
£311,375
£311,375
£388,226
£31,226
£397,151
£754,151
£923,726 £1,280,726
£332,093
£20,718
£339,877
£651,252
£799,155 £1,110,530
0%
0%
0%
0%
0%
0%
0%
0%
0%
* Other for 2021includes benefits at Miniumum level; at target level includes benefits plus bonus payout of 60% of maximum and LTIP threshold vesting at 25% of maximum award
in normal cirumstances. Maximum level includes benefits plus full payout of bonus and LTIP at Maximum level.
Basic Salary
2021 basic salary will be the same as 2020. Salaries of Executive Directors are shown in the table above:
Pension Arrangements
None of the current Executive Directors will receive any pension benefit from the Company from 2020 onwards.
Annual Bonus
The maximum bonus potential for the year ending 31st December 2021 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 Remuneration Committee has access to independent advice where appropriate. The Committee appointed Mercer Limited
(‘Mercer’) in August 2019 to provide independent advice on remuneration matters. Mercer 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. Mercer does not undertake any other work for the Company, and the
Committee is satisfied that the advice provided by Mercer was objective and independent.
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.
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.
The Committee also receives input from the Group Chief Executive Officer and advice from the Company Secretary. No individuals are
present when their own remuneration is being discussed.
54
TClarke Annual Report and Financial Statements 2020
Governance
55
Annual Report on Remuneration continued
Directors‘ Report
Long-term Incentives
Consistent with past awards, LTIP awards that will be granted in 2021 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 2023.
The Directors’ report should be read in conjunction with the Strategic report on pages 1 to 26 and the Corporate Governance report
on pages 27 to 58, 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.
Annual growth rate 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 Base point from which performance is measured is based on average underlying EPS for the three years ended 31st December 2020.
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. There are no fee increases in 2021. Fees are shown below:
Non-Executive
Directors
Position
Iain McCusker Chairman
Mike Robson
Peter Maskell
Louise Dier
Audit Committee Chair
Remuneration Committee Chair
Independent Director
2021
base fee
£97,000
£51,200
£51,200
£51,200
Committee
fee
£0
£5,000
£5,000
£0
2020
base fee
£97,000
£51,200
£51,200
£51,200
Committee
fee
Change
in Total pay
£0
£5,000
£5,000
£0
0%
0%
0%
0%
On behalf of the Board
Peter Maskell
Chair of the Remuneration Committee
24th March 2021
Board membership
Dividends
Directors’ long-term incentives
Corporate Governance report
Engagement with employees
Engagement with stakeholders
Future developments of the business of the Group
Employee equality, diversity and involvement
Carbon emissions
Statement of Directors’ responsibilities in respect of the financial statements
Financial risk management
Subsidiaries
Page 27
Page 11
Pages 38 to 54
Pages 27 to 58
Pages 18 to 19
Pages 16 to 21
Pages 2 to 9
Pages 18 to 19
Page 17
Page 58
Pages 103 to 106
Page 107
Directors
The following Directors served during the year ended 31st December 2020 and as at the date of this report.
Name
Iain McCusker
Mike Robson
Peter Maskell
Louise Dier
Mark Lawrence
Mike Crowder
Trevor Mitchell
Appointment
Chairman
Senior Independent Director
Independent Director
Independent Director
Group Chief Executive Officer
Group Managing Director
Group Finance Director
Brief biographies of current serving Directors, indicating their experience and qualifications, can be found on page 27.
In line with the UK Corporate Governance Code, all the Directors apart from Mike Robson shall be subject to annual re-election at the
forthcoming Annual General Meeting (‘AGM’) on 5th May 2021.
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 £1,432,430 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 AGM.
Going Concern
The Group have a positive net cash balance of £10.2 million (2019: £12.4 million) at the year-end, reflecting £25.2 million of cash (2019:
£12.4 million) and £15.0 million (2019: £nil) which it had drawn down under a revolving credit facility which expires on 31st August
2024. It also has access to a £10.0 million overdraft facility. For details of the covenants in place refer to note 21 on page 97.
The Group utilises its banking facilities 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 renegotiated in May 2020. The Directors
have received confirmation from the bank that they know of no reason why the overdraft facility will not be renewed when it falls due
for review.
After making enquiries and taking account of reasonably possible changes in trading performance, including consideration of a severe
but plausible downside scenario which reflected a repeat of the first Covid national lockdown and the closure of a large number of
construction sites, the Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial statements.
56
TClarke Annual Report and Financial Statements 2020
Governance
57
Directors‘ Report continued
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 2020 was £4,305,255.80, consisting of 43,052,558 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 19 to the financial statements on pages 93 to 96.
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 2020 and 24th March 2021:
Regent Gas Holdings Limited
Hargreaves Lansdown, stockbrokers
Interactive Investor
Heritage Capital Management
Barclays Smart Investor
Walker Crips Investment Management
Number of
shares held at
31st December 2020
% of voting
rights held
Number of
shares held at
24th March 2021
6,928,182
3,016,831
3,010,149
2,510,000
1,974,459
1,347,764
16.09%
7.01%
6.99%
5.83%
4.59%
3.13%
7,385,358
3,060,402
3,424,620
2,510,000
2,008,626
1,358,875
% of voting
rights held
17.15%
7.11%
7.95%
5.83%
4.67%
3.16%
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 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 19 to the financial statements on pages 93 to 96.
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.
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.
Annual General Meeting (‘AGM’)
The AGM of the Company will be held at the Company’s head
office at 45 Moorfields, London EC2Y 9AE at 10am on
Wednesday 5th May 2021. At the time of printing and posting
of this Notice of AGM, the country is experiencing
unprecedented disruption due to the outbreak of Coronavirus
(COVID-19) and the Government has published compulsory
measures (the ‘Stay at Home Measures’) prohibiting, among
other things, indoor public gatherings.
In normal circumstances, the Board greatly values the
opportunity to meet shareholders in person. However, if the
Stay at Home Measures remain in place at the date of the AGM,
you will not be able to attend the meeting and the quorum
requirements for the meeting, which is two members present in
person or by proxy, will be met by two directors who are
shareholders in the Company in order to conduct the business
of the meeting. If you seek to attend the meeting, I am afraid
you will be refused entry. The AGM is important for any public
company, but at the moment the health of the Company’s
shareholders, workforce and officers is paramount.
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 by order of the Board.
Trevor Mitchell
Company Secretary
24th March 2021
TClarke plc is registered in England No. 119351.
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.
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. The insurance was in force throughout the year.
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 2020 (2019: £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.
Independent Auditors
PricewaterhouseCoopers LLP has completed a 10 year tenure
following the audit of the 2020 Financial statements. As a result
the Company held a competitive tender process for the 2021
statutory audit contract, which was overseen by the Audit
Committee. On the recommendation of the Committee the
Board proposes that PricewaterhouseCoopers LLP be
reappointed as auditors.
A resolution is therefore proposed at the AGM for the
reappointment of PricewaterhouseCoopers LLP as independent
auditors of the Company at a rate of remuneration to be
determined by the Audit Committee.
58
TClarke Annual Report and Financial Statements 2020
Governance
59
Statement of Directors‘ Responsibilities in
Respect of the Financial Statements
Independent Auditors‘ Report to the
Members of TClarke PLC
Report on the Audit 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 accounting standards in conformity with the
requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and
company financial statements in accordance with International
Accounting Standards in conformity with the requirements of
the Companies Act 2006.
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of
the profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable international accounting standards
in conformity with the requirements of the Companies Act
2006 and International Financial Reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union have been followed for the Group
financial statements and International Accounting Standards
in conformity with the requirements of the Companies Act
2006 have been followed for the company financial
statements, subject to any material departures disclosed and
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
Company will continue in business.
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
and enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity
of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and company’s position and performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in
Directors’ report confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in
accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group;
• the company financial statements, which have been prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006,
give a true and fair view of the assets, liabilities, financial
position and profit of the company; and
• the Strategic report includes a fair review of the development
and performance of the business and the position of the
Group and 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’s and 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’s and
Company’s auditors are aware of that information
On behalf of the Board
Trevor Mitchell
Group Finance Director
Iain McCusker
Chairman
24th March 2021
TClarke plc
Registered number: 00119351
Opinion
In our opinion, TClarke Plc’s Group financial statements and
Company financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s and of the
Company’s affairs as at 31 December 2020 and of the Group’s
profit and the Group’s and Company’s cash flows for the year
then ended;
• have been properly prepared in accordance with international
accounting standards in conformity with the requirements of
the Companies Act 2006; and
• have been prepared in accordance with the requirements of
the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Financial Statements (“Annual Report”), which
comprise: the Consolidated and Company Statements of Financial
Position as at 31 December 2020; the Consolidated Income
Statement, the Consolidated 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.
Separate opinion in relation to international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union
As explained in note 2 to the Group financial statements, the
Group, in addition to applying international accounting
standards in conformity with the requirements of the
Companies Act 2006, has also applied international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In our opinion, the Group financial statements have been
properly prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
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.
We have provided no non-audit services to the Group in the
period under audit.
Our audit approach
Overview
Audit Scope
• Our audit covered the audit of all the significant components
in TClarke PLC, TClarke Contracting Limited, which is the
main external trading entity, Weylex Properties Ltd which
holds the Group’s properties and TClarke Services Ltd, where
the defined benefit pension is held. All work was completed
by the Group audit team. The above accounted for 100% of
the Group’s revenue and profit before tax.
Key Audit Matters
• Revenue recognition and long-term contract accounting in
respect of construction contracts (Group)
• Impact of Covid-19 (Group and Company)
• Goodwill and intangibles impairment assessment (Group)
Materiality
• Overall Group materiality: £1,483,000 (2019: £1,490,000)
based on 0.5% of average revenue for the last five years.
• Overall Company materiality: £625,000 (2019: £519,000)
based on 1% of total assets.
• Performance materiality: £1,112,250 (Group) and £469,000
(Company).
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.
Capability of the audit in detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with
our responsibilities, outlined in the Auditors’ responsibilities for
the audit of the financial statements section, to detect material
misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we
identified that the principal risks of non-compliance with laws
and regulations related to the Listing Rules, Pensions
legislation and UK tax legislation, and we considered the
extent to which non-compliance might have a material effect
on the financial statements. We also considered those laws and
regulations that have a direct impact on the preparation of the
financial statements such as the Companies Act 2006.
We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that
the principal risks were related to posting inappropriate
journals to increase revenue or reduce expenditure,
management bias in accounting estimates, and inappropriate
allocation of costs between contracts. Audit procedures
performed by the engagement team included:
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Report on the Audit of the Financial Statements
• Discussions with management in respect of known or
suspected instances of non-compliance with laws and
regulation and fraud, and review of board minutes and
internal audit reports;
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.
• Evaluation of the operating effectiveness of management’s
key controls around the forecasting of costs and margin
estimation;
• Challenging assumptions and judgments made by
management in their significant accounting estimates, in
particular those that involve the assessment of future events,
which are inherently uncertain – the key estimates
determined in this respect are those relating to Revenue and
Margin, Impairment of Goodwill and Investments and
Retirement Benefit Obligations ; and
• Identifying and testing journal entries, in particular testing
a sample of journal entries posted with unusual account
combinations, such as those with unusual or unexpected
journal postings to the income statement as well as testing
journals posted by unexpected users or those which contain
unusual words.
• There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a
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.
Impact of Covid-19 is a new key audit matter this year. Defined
Benefit Pension Plan Liabilities, which was a key audit matter last
year, is no longer included because of the valuation of the
liability being considered an elevated risk, with no one off
unusual material transactions in current year, as compared to
prior year. Otherwise, the key audit matters below are consistent
with last year.
Key audit matter
How our audit addressed the key audit matter
Revenue Recognition and Long-term Contract Accounting
in Respect of Construction Contracts (Group)
Refer to Note 3 (Significant accounting policies), Note 4
(Significant judgements and sources of estimation
uncertainty) and Note 5 (Segment information). Total revenue
equalled £231.9m for the year ended 31 December 2020 (2019:
£334.6m). 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 15 requires
revenue to be recognised over the course of the contract by
selecting an appropriate method for measuring the entity’s
progress towards complete satisfaction of that performance
obligation. If a project is, or is forecast to be, loss making, it
requires the full loss to be recognised immediately.
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. Testing percentage
completion enables us to determine the appropriateness of
revenue recognition.
We obtained an understanding of management’s own processes
and controls for reviewing long-term contracts and gained an
understanding of the key judgements involved and the
background to the sample of contracts discussed below.
We selected a sample of contracts to test, based on both
quantitative and qualitative criteria including:
• high levels of revenue recognised in the year;
• low margin or loss-making contracts;
• significant balance sheet exposure.
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, as follows:
• We held discussions with management to understand and
challenge areas of judgement taken.
• We agreed forecast revenue to signed contracts, signed
variations or other supporting documentation and traced a
sample of variations to client issued certification/instructions
where appropriate;
• We compared revenue recognised with amounts certified by
clients and confirmed, using our industry knowledge and
experience, that the differences were appropriate and through
this, assessed the recoverability of balance sheet items;
Key audit matter
How our audit addressed the key audit matter
• We re-performed the key calculations behind the margin
applied, the profit taken and the stage of completion, as well
as balance sheet exposure; and
• We evaluated forecast costs to complete through analytical
procedures, compared to prior forecast (where applicable)
and tested a sample of forecast costs to complete to
supporting calculations or third-party pricing documentation.
In addition, for the remaining contract population we performed
the following:
• We reviewed the forecast margins and for those which had
moved significantly since tender and / or prior reporting
periods, we obtained explanations from management;
• We target tested contracts with in year revenue above
performance materiality. Costs to date were agreed to
Contract Value Reports, which are produced by quantity
surveyors and include costs to date based on invoiced costs.
Revenue recognised has also been compared to year end
certificates.
Based on all the evidence obtained in the above procedures,
we are satisfied that revenue and profit recognised by
management is supportable. We also considered the adequacy
of the disclosures in the financial statements in relation to
contracts and the disclosures in respect of significant judgements
and estimates.
We reviewed and evaluated management’s cash flow forecasts
and the process by which they were determined and approved,
agreeing the forecasts with the latest approved budgets and
confirming the mathematical accuracy of the underlying
calculations.
We assessed management’s forecast and various scenarios in
respect of the impact of Covid-19 on the Group’s ability to
continue as a going concern. We have assessed the Group’s
liquidity and confirmed the revolving credit facility terms to
support management’s going concern assessment.
We considered any potential impairment indicators to the
carrying value of assets and the broader impact to the Group’s
financial statements as detailed in the ‘Goodwill and intangibles
impairment assessment (Group), Key Audit Matter below.
We considered whether changes to working practices brought
about by Covid-19 had adversely impacted the effectiveness
of management’s business process and IT controls. We did not
identify any evidence of significant deterioration in the control
environment.
Impact of Covid-19 (Group and Company)
The Covid-19 outbreak has been declared a pandemic by the
World Health Organisation. It has caused significant disruption
and economic uncertainty globally.
As a result of the Covid-19 lockdown in March 2020, TClarke’s
construction sites were closed for 2 to 3 months. They have all
subsequently re-opened, but the outbreak has impacted Group
and Company performance as a result. There is a potential impact
on the Group’s and Company’s future expected cash flows due
to the heightened uncertainty, which has a direct impact on the
going concern assessment and asset impairment assessments.
Management has considered its short-term and medium-term
forecasts as part of the Company’s and Group’s going concern
statements and the group’s viability assessment, including the
impact of reduced revenues and operating profits due to
Covid-19.
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Report on the Audit of the Financial Statements
Key audit matter
How our audit addressed the key audit matter
Goodwill Impairment Assessment (Group)
Refer to Note 3 (Significant accounting policies), Note 4
(Significant judgements and sources of estimation uncertainty)
and Note 11 (Intangible assets). We focused on this area because
the Directors’ assessment of the carrying value of goodwill being
£25.3m (2019: £25.3m) involves complex and subjective
judgements about the future results of the business.
Management has prepared two scenarios; the first represents a
base case and the second, a downside. The base case assumes
increasing operating margins from 2021 to 2023. The downside
emulates the recovery post site shutdown in the first half of the
year, such that revenue and operating profit levels for the second
half of 2020 are assumed to be maintained in perpetuity, with no
growth year on year. Neither scenario resulted in an impairment.
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 Company, the accounting
processes and controls, and the industry in which they operate.
Our audit covered the audit of all the significant components
in TClarke PLC, TClarke Contracting Limited, which is the main
external trading entity, Weylex Properties Ltd which holds the
Group’s properties and TClarke Services Ltd, where the defined
benefit pension is held. All work was completed by the Group
audit team. The above accounted for 100% of the Group’s
revenue and profit before tax.
We evaluated the Directors’ future cash flow forecasts, which were
prepared to a sufficiently detailed level, including the following:
• Challenged the forecast cash flows over the 36 month
period to consider whether the estimates and assumptions are
reasonable.
• Tested the integrity of the underlying calculations;
• Compared 2020 financial performance to budget and
understood the drivers of changes in profitability;
• Performed sensitivity analysis around the key drivers of the cash
flow forecasts, in particular the revenue growth and profit
assumptions; and
• Challenged the discount rate used by independently
recalculating the cost of capital, which we have used in our
sensitivities. Management’s calculation of the discount rate was
also assessed by our valuation experts.
Management have prepared sensitivity analysis, in respect of
all CGUs. We examined the disclosures made in the financial
statements and compared these to the sensitivity analyses
performed by management. We concluded that the disclosures
are appropriate.
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:
Financial statements - Group
Financial statements - Company
Overall materiality
£1,483,000 (2019: £1,490,000).
£625,000 (2019: £519,000).
How we
determined it
Rationale for
benchmark applied
Based on 0.5% of average revenue for the last five years.
Based on 1% of total assets
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 Company does not
trade and we believe that total assets
is therefore the most appropriate
benchmark.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.
In relation to the Company’s reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this 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 and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
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 £96,500 and £1,408,850. Certain
components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures, for
example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to
£1,112,250 for the group financial statements and £469,000 for
the company financial statements.
In determining the performance materiality, we considered a
number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above £74,150
(group audit) (2019: £74,000) and £26,000 (company audit)
(2019: £24,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s
and the Company’s ability to continue to adopt the going
concern basis of accounting included:
• assessing the inputs and underlying assumptions of the
base case going concern model prepared by management;
• assessing the downside scenarios which have been used to
sensitise the base case model, including consideration of
the underlying assumptions within each of these forecasts;
• reviewing management’s analysis of both liquidity and
covenant compliance to ensure there is sufficient liquidity
and no forecast covenant breaches over the course of the
going concern period.
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Company’s ability
to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised
for issue.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
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Independent Auditors‘ Report to the Members of TClarke PLC continued
Report on the Audit of the Financial Statements
Our review of the directors’ statement regarding the
longer-term viability of the Group was substantially less in scope
than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant
provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the
financial statements and our knowledge and understanding of
the Group and Company and their environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the
financial statements and our knowledge obtained during
the audit:
• The directors’ statement that they consider the Annual
Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
the members to assess the group’s and company’s position,
performance, business model and strategy;
• The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
• The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the 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.
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 31 December 2020 is
consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and
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.
Directors’ Remuneration
In our opinion, the part of the Annual Report on Remuneration
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements
in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional
responsibilities with respect to the corporate governance
statement as other information are described in the Reporting
on other information section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the
financial statements and our knowledge obtained during the
audit, and we have nothing material to add or draw attention
to in relation to:
• The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the Group’s and
Company’s ability to continue to do so over a period of at
least twelve months from the date of approval of the financial
statements;
• The directors’ explanation as to their assessment of the
Group’s and Company’s prospects, the period this assessment
covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or
assumptions.
Responsibilities for the financial statements and the audit
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 obtained all the information and explanations
we require for our audit; or
• adequate accounting records have not been kept by the
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 Company financial statements and the part of the Annual
Report on Remuneration 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 directors on 13 May 2011 to audit the
financial statements for the year ended 31 December 2011
and subsequent financial periods. The period of total
uninterrupted engagement is 10 years, covering the years
ended 31 December 2011 to 31 December 2020.
Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 March 2021
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’
responsibilities in respect of the financial statements, 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 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 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.
Our audit testing might include testing complete populations
of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
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 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.
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TClarke Annual Report and Financial Statements 2020
Financial Statements
67
Consolidated Income Statement
For the year ended 31st December 2020
Consolidated Statement of
Comprehensive Income
For the year ended 31st December 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Amortisation of intangible assets
Restructuring costs
Other administrative expenses
Total administrative expenses
Operating profit
Finance costs
Profit before taxation
Taxation
Profit for the financial year
Earnings per share
Attributable to owners of TClarke plc
Basic
Diluted
Note
5
Underlying
items
£m
231.9
(199.0)
32.9
7
7
7
6
9
–
–
(26.9)
(26.9)
6.0
(0.9)
5.1
(0.8)
4.3
2020
Non-
underlying
items
£m
–
–
–
(0.2)
(3.7)
–
(3.9)
(3.9)
–
(3.9)
0.8
(3.1)
Total
£m
231.9
(199.0)
32.9
(0.2)
(3.7)
(26.9)
(30.8)
2.1
(0.9)
1.2
–
1.2
Underlying
items
£m
334.6
(296.1)
38.5
–
–
(28.3)
(28.3)
10.2
(1.0)
9.2
(1.2)
8.0
2019
Non-
underlying
items
£m
–
–
–
(0.2)
–
–
(0.2)
(0.2)
–
(0.2)
–
(0.2)
Total
£m
334.6
(296.1)
38.5
(0.2)
–
(28.3)
(28.5)
10.0
(1.0)
9.0
(1.2)
7.8
10
10
10.29p
9.66p
(7.42)p
(6.97)p
2.87p
2.69p
18.81p
17.90p
(0.44)p
(0.41)p
18.37p
17.49p
The notes on pages 74 to 107 form part of these financial statements.
Profit for the year
Other comprehensive income / (expense)
Items that will not be reclassified to the income statement
Actuarial loss on defined benefit pension scheme
Revaluation of freehold property
Revaluation of minority shareholding equity investment
Deferred tax relating to items that will not be reclassified
Total other comprehensive expense for the year (net of tax)
Total comprehensive (expense) / income for the year
The notes on pages 74 to 107 form part of these financial statements.
2020
£m
1.2
(6.5)
–
(2.0)
1.7
(6.8)
(5.6)
2019
£m
7.8
(6.9)
0.4
–
1.2
(5.3)
2.5
68
TClarke Annual Report and Financial Statements 2020
Financial Statements
69
Consolidated Statement of
Financial Position
As at 31st December 2020
Company Statement of
Financial Position
As at 31st December 2020
TClarke PLC
Registered number 00119351
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Total non-current assets
Current assets
Inventories
Amounts due from customers under construction contracts
Trade and other receivables
Current tax receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Bank loans
Amounts due to customers under construction contracts
Trade and other payables
Current tax liabilities
Obligations under leases
Total current liabilities
Net current assets
Non-current liabilities
Obligations under leases
Trade and other payables
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Total net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT reserve
Revaluation reserve
Retained earnings
Total equity
Note
11
12
14
17
15
16
17
20
21
16
18
24,26
24,26
18
23
19
19
2020
£m
25.3
8.0
6.2
3.6
43.1
0.4
41.7
34.5
0.7
25.2
102.5
145.6
(15.0)
(1.1)
(77.5)
–
(1.3)
(94.9)
7.6
(2.2)
(2.6)
(30.2)
(35.0)
2019*
£m
25.5
9.0
4.8
5.0
44.3
0.2
44.6
36.9
–
12.4
94.1
138.4
–
(0.1)
(82.9)
(0.2)
(1.4)
(84.6)
9.5
(2.8)
(1.7)
(26.4)
(30.9)
(129.9)
15.7
(115.5)
22.9
4.3
3.8
(2.1)
0.8
8.9
15.7
4.3
3.8
(2.0)
0.9
15.9
22.9
Non-current assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Current tax receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Bank loans
Trade and other payables
Total current liabilities
Net current assets
Non-current liabilities
Intra-Group loans
Total non-current liabilities
Total liabilities
Total net assets
Equity attributable to owners of the parent
Share capital
Share premium
ESOT reserve
Retained earnings
Total equity
The notes on pages 74 to 107 form part of these financial statements.
Note
13
17
20
18
18
19
19
2020
£m
43.6
43.6
4.8
0.6
19.0
24.4
68.0
(15.0)
(6.1)
(21.1)
3.3
(29.9)
(29.9)
(51.0)
17.0
4.3
3.8
(2.1)
11.0
17.0
2019
£m
43.4
43.4
2.7
1.7
4.5
8.9
52.3
–
(6.9)
(6.9)
2.0
(28.3)
(28.3)
(35.2)
17.1
4.3
3.8
(2.0)
11.0
17.1
The Company has taken advantage of the exemption conferred by section 408 of the Companies Act 2006 from presenting its own
income statement. The profit after tax for the year was £1.9 million (2019: £1.4 million).
The financial statements on pages 66 to 107 were approved by the Board of Directors on 24th March 2021 and were signed on its
behalf by:
Iain McCusker
Director
Mark Lawrence
Director
* See note 27
The notes on pages 74 to 107 form part of these financial statements.
The financial statements on pages 66 to 107 were approved by the Board of Directors on 24th March 2021 and were signed on its
behalf by:
Iain McCusker
Director
Mark Lawrence
Director
70
TClarke Annual Report and Financial Statements 2020
Financial Statements
71
Consolidated Statement of Cash Flows
For the year ended 31st December 2020
Company Statement of Cash Flows
For the year ended 31st December 2020
Net cash generated from operating activities
Investing activities
Investment in minority shareholding
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
New shares issuance
Facility fee
Proceeds from bank borrowing
Equity dividends paid
Acquisition of shares by ESOT
Repayment of lease obligations
Net cash generated from / (used in) financing activities
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
The notes on pages 74 to 107 form part of these financial statements.
Note
20
21
19
19
20
20
2020
£m
3.7
(2.0)
(0.2)
(2.2)
–
(0.1)
15.0
(1.9)
(0.1)
(1.6)
11.3
12.8
12.4
25.2
2019
£m
3.9
–
(0.3)
(0.3)
0.1
(0.1)
–
(1.7)
(0.6)
(1.3)
(3.6)
–
12.4
12.4
Net cash used in operating activities
Investing activities
Dividends received from subsidiaries
Net cash generated from investing activities
Financing activities
Proceeds from bank borrowing
Facility fee
New shares
Equity dividends paid
Acquisition of shares by ESOT
Net cash generated from / (used in) financing activities
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
The notes on pages 74 to 107 form part of these financial statements.
Note
20
21
19
19
20
20
2020
£m
(2.4)
4.0
4.0
15.0
(0.1)
–
(1.9)
(0.1)
12.9
14.5
4.5
19.0
2019
£m
(3.7)
6.0
6.0
–
(0.1)
0.1
(1.7)
(0.6)
(2.3)
–
4.5
4.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31ST DECEMBER 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31ST DECEMBER 2020
72
TClarke Annual Report and Financial Statements 2020
Financial Statements
73
Consolidated Statement of Changes
in Equity
For the year ended 31st December 2020
Company Statement of Changes
in Equity
For the year ended 31st December 2020
At 1st January 2019
Comprehensive income
Profit for the year
Other comprehensive (expense)/income
Actuarial loss on retirement benefit
obligation
Deferred income tax on actuarial loss
on retirement benefit obligation
Revaluation of freehold property, net of tax
Total other comprehensive expense
Total comprehensive income
Transactions with owners
New shares
Share-based payment credit
Shares acquired by ESOT
Dividends paid
Total transactions with owners
At 31st December 2019
Comprehensive income/(expense)
Profit for the year
Other comprehensive (expense)/income
Actuarial loss on retirement benefit obligation
Deferred income tax on acturial loss on
Retirement benefit obligation
Minority shareholding equity investment
Total other comprehensive expense
Total comprehensive expense
Transactions with owners
Transfer on depreciation of freehold properties
Share-based payment credit
Shares acquired by ESOT
Dividends paid
Total transactions with owners
At 31st December 2020
–
–
–
–
–
–
–
–
–
–
–
4.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
0.1
3.8
–
–
–
–
–
–
–
–
–
–
–
4.3
3.8
–
–
–
–
–
–
–
–
(0.6)
–
(0.6)
(2.0)
–
–
–
–
–
–
–
–
(0.1)
–
(0.1)
(2.1)
The notes on pages 74 to 107 form part of these financial statements.
Attributable to owners of the parent
Share
capital
£m
4.3
Share
premium
£m
ESOT share
reserve
£m
Revaluation
reserve
£m
Retained
earnings
£m
3.7
(1.4)
0.5
15.0
Total
Equity
£m
22.1
–
–
–
0.4
0.4
0.4
–
–
–
–
–
7.8
7.8
(6.9)
1.2
–
(5.7)
2.1
–
0.5
–
(1.7)
(1.2)
(6.9)
1.2
0.4
(5.3)
2.5
0.1
0.5
(0.6)
(1.7)
(1.7)
At 1st January 2019
Comprehensive income
Profit for the year
Total comprehensive income
Transactions with owners
New shares
Share-based payment credit
Shares acquired by ESOT
Dividends paid
Total transactions with owners
At 31st December 2019
Comprehensive income
Profit for the year
Total comprehensive income
Transactions with owners
Shares acquired by ESOT
Dividends paid
Attributable to owners of the parent
Share
capital
£m
4.3
Share
premium
£m
ESOT share
reserve
£m
Retained
earnings
£m
3.7
(1.4)
11.1
Total
Equity
£m
17.7
1.4
1.4
0.1
0.2
(0.6)
(1.7)
(2.0)
1.4
1.4
–
0.2
–
(1.7)
(1.5)
11.0
17.1
1.9
1.9
–
(1.9)
(1.9)
11.0
1.9
1.9
(0.1)
(1.9)
(2.0)
17.0
–
–
–
–
–
–
–
4.3
–
–
–
–
–
–
–
0.1
–
–
–
0.1
3.8
–
–
–
–
–
–
–
–
–
(0.6)
–
(0.6)
(2.0)
–
–
(0.1)
–
(0.1)
(2.1)
0.9
15.9
22.9
Total transactions with owners
–
–
–
–
–
–
(0.1)
–
–
–
(0.1)
0.8
1.2
1.2
At 31st December 2020
4.3
3.8
The notes on pages 74 to 107 form part of these financial statements.
(6.5)
1.7
(2.0)
(6.8)
(5.6)
0.1
0.4
–
(1.9)
(1.4)
8.9
(6.5)
1.7
(2.0)
(6.8)
(5.6)
–
0.4
(0.1)
(1.9)
(1.6)
15.7
74
TClarke Annual Report and Financial Statements 2020
Financial Statements
75
Notes to the Financial Statements
For the year ended 31st December 2020
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 108. The nature of the Group’s operations and its
principal activities are described in note 5 and in the Strategic report on pages 1 to 26. The Company is limited by shares.
2 Basis of Preparation
Statement of Compliance
These financial statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with International Financial Reorting Standards (“IFRS”) adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union 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 Company financial statements of
TClarke plc and the consolidated financial statements of TClarke plc and all its subsidiaries made up to 31st December 2020 and have
been presented in £ million.
The preparation of financial statements in conformity with IFRS as adopted by the EU requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements, are disclosed in note 4.
Going Concern
The Group have a positive net cash balance of £10.2 million (2019: £12.4 million) at the year-end, reflecting £25.2 million of cash (2019:
£12.4 million) and £15.0 million (2019: £nil) which it had drawn down under a revolving credit facility which expires on 31st August
2024. It also has access to a £10.0 million overdraft facility. For details of the covenants in place refer to note 21 on page 97.
The Group utilises its banking facilities 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 renegotiated in May 2020. The Directors
have received confirmation from the bank that they know of no reason why the overdraft facility will not be renewed when it falls due
for review.
After making enquiries and taking account of reasonably possible changes in trading performance, including consideration of a severe
but plausible downside scenario which reflected a repeat of the first COVID national lockdown and the closure of a large number of
construction sites, the Directors have, at the time of approving the financial statements, a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial statements.
Application of New and Revised Standards
The principal accounting policies applied in the preparation of these consolidated and Company financial statements are set out in
note 3 below. These policies have been consistently applied to all the years presented.
3 Significant Accounting Policies
(i) Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31st December each year. Control is achieved when the Company has power over the investee, is
exposed, or has rights, to variable returns from its involvement with the investee, and has the ability to use its power to affect its returns.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from
the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All
intra-Group transactions, balances, income and expenses are eliminated on consolidation.
(ii) 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.
(iii) Segmental Reporting
Operating divisions are reported in a manner consistent with internal reporting provided to the Board who, representing the ‘Chief
Operating Decision-Maker’ as per IFRS 8, are responsible for allocating resources to, and assessing the performance of, operating
divisions.
(iv) Revenue Recognition
Revenue is recognised in accordance with the five-step model outlined in IFRS 15:
1. Identify the contract with the customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognise revenue when or as the entity satisfies its performance obligations.
76
TClarke Annual Report and Financial Statements 2020
Financial Statements
77
Notes to the Financial Statements continued
For the year ended 31st December 2020
3 Significant Accounting Policies continued
Revenue derives largely from two sources: most significantly, from long-term contracts whereby the Group designs, installs and
integrates mechanical and electrical systems for customers (‘construction contracts’, see (v); less significantly, from ongoing
maintenance works on previously installed systems. In both instances, steps one to five of the revenue recognition process are
determined with reference to the formal contract which exists with the customer. In these contracts, the transaction price, performance
obligations, etc. are readily identifiable and distinct.
Revenue from maintenance work is measured as the amount the entity expects to be entitled to in exchange for transferring goods or
services to the customer – this amount is net of discounts and VAT. It is recognised at the point in time the customer obtains control
over the asset associated with the works.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the
customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction price
for the time value of money.
(v) Construction Contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised over time by reference to
the stage of completion of the contract activity at the reporting date, measured and 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 Group,
can be reliably foreseen, taking into account the circumstances of each contract. Variations are included to the extent it is highly
probable that its inclusion will not result in a significant revenue reversal in the future. Full provision is made for any foreseeable losses
to completion.
‘Contract assets’ (as discussed in IFRS 15.107) are recognised when the Group performs by transferring goods or services to a customer
before the customer pays consideration or before payment is due. This asset is assessed for impairment in accordance with IFRS 9.
These ‘contract assets’ have been termed ‘Amounts due from customers under construction contracts’ in these financial statements.
‘Contract liabilities’ (as discussed in IFRS 15.106) are recognised if a customer pays consideration before the entity transfers a good or
service. These have been captioned in these financial statements as ‘Amounts due to customers under construction contracts’
respectively.
Bid costs are expensed as incurred, unless recoverable from customers.
(vi) 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.
3 Significant 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.
(vii) 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 operating segments that are
expected to benefit from the synergies of the combination giving rise to the goodwill.
Impairment charges are included in non-underlying 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.
(viii) 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.
(ix) 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.
78
TClarke Annual Report and Financial Statements 2020
Financial Statements
79
Notes to the Financial Statements continued
For the year ended 31st December 2020
3 Significant Accounting Policies continued
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 it 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.
3 Significant Accounting Policies continued
Trade and Other Receivables
Trade and other receivables are non-interest bearing and are measured on initial recognition at fair value and subsequently at
amortised cost. On initial recognition, a loss allowance is created which reflects the lifetime expected credit loss on that asset. This loss
allowance is subsequently reassessed at each reporting period date.
Increases in the carrying amount arising on revaluation of land and buildings are credited to other comprehensive income and shown as
revaluation reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged in other comprehensive
income and debited against revaluation reserves directly in equity; all other decreases are charged to the income statement.
Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement
and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings. On disposal of the
asset, the balance of the revaluation reserve pertaining to the asset is transferred from the revaluation reserve to retained earnings.
Depreciation is calculated on a straight-line basis so as to write off the cost less residual values of the relevant assets over their useful
lives, using the following rates:
Freehold properties: 2%
Leasehold improvements: 10% or life of lease if shorter
Plant, machinery and motor vehicles: 10%–33%
Right-of-use assets held under leases are depreciated over their expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
(x) 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.
During the year the Group made a minority shareholding equity investment. In accordance with an irrevocable election made upon
initial recognition (as per IFRS 9 5.7.5), the subsequent remeasurement of the fair value of the investment has been charged to other
comprehensive income.
(xi) 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.
(xii) Leasing and Hire Purchase Commitments
As a Lessee
The Group assesses whether a contract is or contains a lease at the start of a contract. The Group recognises a right-of-use asset and a
corresponding lease liability for all lease agreements in which it is the lessee (with the exception of short-term and low value leases as
defined in IFRS 16 which are recognised as an operating expense on a straight-line basis over the term). The lease liability is initially
measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit
in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate. The right-of-use asset recognised initially is the amount of the lease liability, adjusted for any lease payments
and lease incentives made before the commencement date, in accordance with IFRS 16.24.
As a Lessor
Income is recognised on a straight-line basis over the term of the relevant lease.
(xiii) Financial Instruments
The Group’s financial instruments comprise trade and other receivables (excluding prepayments), contract trade and other payables
(excluding deferred income and taxation), and cash and cash equivalents net of overdrafts. The Group classifies its financial assets as
loans and receivables and its financial liabilities as liabilities at amortised cost. The Group does not trade in any financial derivatives.
Financial assets and liabilities are offset and the net amount reported in the statement of financial position 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 are presented net of the loss allowance.
Bank Deposits
Bank deposits comprise cash placed on deposit with financial institutions with an initial maturity of six months or more, and are
measured at amortised cost. Finance income is recognised using the effective interest method and is added to the carrying value of the
asset as it arises.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand, bank overdrafts, demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank
overdrafts are included within current liabilities in the statement of financial position. Finance income and expense are recognised using
the effective interest method and are added to the carrying value of the asset or liability as they arise.
Bank Loans
Interest-bearing bank loans are recorded at the fair value of the proceeds received, net of direct issue costs. Finance charges are
accounted for on an accruals basis in the income statement using the effective interest method, and are added to the carrying value of
the instrument to the 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.
(xiv) 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.
(xv) 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.
80
TClarke Annual Report and Financial Statements 2020
Financial Statements
81
Notes to the Financial Statements continued
For the year ended 31st December 2020
3 Significant Accounting Policies continued
(xvi) 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.
(xvii) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, these are
recognised when they are paid. In the case of final dividends, these are recognised when approved by the shareholders at the AGM.
(xviii) 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.
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.
(xix) 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.
(xx) Share-based Payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set
out in note 19.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the
end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate
with a corresponding adjustment to equity.
(xxi) 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, such as the costs associated
with a major programme of restructuring. This also 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 3(v) on page 76. 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. The Group only recognises revenue once there is a formal contractual entitlement and
the recognition criteria of IFRS 15 have been met. At 31st December 2020 the Group had approximately £15 million (2019: £31 million)
of formally instructed, unagreed variations, of which £9 million (2019: £19 million) had been taken to revenue. It is the Group’s policy
not to recognise variations in full until formally agreed.
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 11. 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 23, and include the discount rate, expected return on assets, rate of inflation and mortality rates. The
Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in the assumptions used
may have a significant effect on the income statement, statement of comprehensive income and the statement of financial position.
A sensitivity analysis is included in note 23 on page 102.
5 Segment Information
(i) Reportable Segments
The Group provides mechanical and electrical contracting and related services to the construction industry and end users.
For management and internal reporting purposes, the Group is organised geographically into three regional divisions: London, UK
South and UK North, reporting to the Board who represent the ‘chief operating decision-maker’ as per IFRS 8. The measurement basis
used to assess the performance of the divisions is underlying operating profit, stated before amortisation of intangible assets and other
non-underlying items.
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 the
location of customers. The accounting policies for the reportable segments are the same as the Group’s accounting policies disclosed
in note 3. Segmental information is based on internal management reporting.
82
TClarke Annual Report and Financial Statements 2020
Financial Statements
83
Notes to the Financial Statements continued
For the year ended 31st December 2020
5 Segment Information continued
(ii) Segment Information and Revenue Analysis – Current Year
5 Segment Information continued
Revenue is wholly attributable to the principal activity of the Group and arises solely within the United Kingdom.
Revenue from contracts with customers
Underlying operating profit
Restructuring costs
Amortisation of intangibles
Operating profit
Finance costs
Profit before tax
Taxation expense
Profit for the year
Business sector
Facilities Management
Infrastructure
Engineering Services
Residential & Hotels
Technologies
Total revenue
(iii) Segment Information and Revenue Analysis – Prior Year
Revenue from contracts with customers
Underlying operating profit
Amortisation of intangibles
Operating profit
Finance costs
Profit before tax
Taxation expense
Profit for the year
Business sector
Facilities Management and Frameworks
Infrastructure
Engineering Services
Residential & Hotels
Technologies
Total revenue
London
£m
134.6
4.9
–
–
4.9
–
4.9
–
4.9
UK South
£m
UK North
£m
Group costs
and
Unallocated
£m
55.1
2.7
–
–
2.7
–
2.7
–
2.7
42.2
0.7
–
(0.2)
0.5
–
0.5
–
0.5
–
(2.3)
(3.7)
–
(6.0)
(0.9)
(6.9)
–
(6.9)
London
£m
UK South
£m
UK North
£m
2.4
20.6
59.4
21.7
30.5
134.6
9.7
22.1
15.7
7.6
–
55.1
5.7
16.2
6.5
12.8
1.0
42.2
London
£m
201.0
UK South
£m
66.3
8.2
–
8.2
–
8.2
–
8.2
3.6
–
3.6
–
3.6
–
3.6
Group costs
and
Unallocated
£m
UK North
£m
67.3
1.4
(0.2)
1.2
–
1.2
–
1.2
–
(3.0)
–
(3.0)
(1.0)
(4.0)
(1.2)
(5.2)
London
£m
UK South
£m
UK North
£m
2.7
14.2
112.7
26.9
44.5
201.0
11.6
23.4
25.4
5.5
0.4
66.3
14.9
18.7
9.8
23.4
0.5
67.3
Total
£m
231.9
6.0
(3.7)
(0.2)
2.1
(0.9)
1.2
–
1.2
Total
£m
17.8
58.9
81.6
42.1
31.5
231.9
Total
£m
334.6
10.2
(0.2)
10.0
(1.0)
9.0
(1.2)
7.8
Total
£m
29.2
56.3
147.9
55.8
45.4
334.6
Revenue recognised in the year that was included in the contract liability balance at the beginning of the year was £0.1 million
(2019: £8.4 million).
At the end of the year, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially
unsatisfied) was £271.8 million (2019: £250.2 million). These will be recognised as revenue in accordance with the satisfaction of the
performance obligations.
No single customer contributed 10% or more of the Group’s revenue for 2020 (2019: One customer contributed £37.1m).
In the current year, the incremental costs of obtaining a contract with a customer which has been recognised as an asset is £nil
(2019: £nil).
In the current year, the costs to fulfil a contract with a customer which has been recognised as an asset is £nil (2019: £nil).
Of the £231.9 million revenue recognised in 2020 (2019: £334.6 million), £218.4 million was recognised over time (2019: £317.1 million)
and £13.5 million was recognised at a point in time (2019: £17.5 million). This disclosure has been included in 2020 to comply with the
disclosure requirements of IFRS 15.
6 Finance Costs
Finance costs
Interest on lease liabilities
Interest on bank overdrafts and loans
Interest cost in respect of defined benefit pension schemes
Total
7 Operating Profit
(i) Operating Profit is Stated After Charging
Amortisation of intangible assets
Depreciation of property, plant and equipment
Project-related raw materials and consumables
Impairment loss
Fees payable to the Company’s auditors for the audit of:
The Company and consolidation
Subsidiary companies
Employee benefit expense (see note 8)
2020
£m
(0.1)
(0.3)
(0.5)
(0.9)
2020
£m
0.2
2.1
56.0
–
0.2
0.1
72.0
2019
£m
(0.1)
(0.2)
(0.7)
(1.0)
2019
£m
0.2
2.1
77.4
0.2
0.2
0.1
79.9
The auditors’ fees for non-audit services during the year were £nil (2019: £nil).
Non-underlying items include £0.2m amortisation of intangible assets relating to acquired customer relationships, and the £3.7m cost
of a restructuring programme, principally comprising redundancy costs.
84
TClarke Annual Report and Financial Statements 2020
Financial Statements
85
Notes to the Financial Statements continued
For the year ended 31st December 2020
8 Employee Benefit Expense
(i) 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 19)
Social security costs
Other pension costs
Total employee benefit expense
Group
2020
£m
63.0
0.4
6.4
2.2
72.0
2019
£m
68.5
0.5
7.0
3.9
79.9
£3.1m of the total employee benefit expense has been included within non-underlying items (2019: £nil).
All employee costs of the Group and the Company relate to continuing operations.
The Company has no employees (2019: no employees). The Directors of the Company are remunerated by TClarke Services Limited.
Of their remuneration, an amount of £0.1 million (2019: £0.1 million) relates to services rendered to the Company.
In the current year, £0.2 million (2019: £0.3 million) was recharged to the Company from TClarke Services Limited in relation to
share-based payments for the Company’s Directors.
(ii) Monthly Average Number of Employees
Staff (including Directors)
Operatives
Total
Group
2020
Number
425
869
1,294
2019
Number
469
920
1,389
9 Taxation
Current tax expense
UK corporation tax payable on profits for the year
Adjustment in relation to prior years
Deferred tax expense
Arising on:
Origination and reversal of timing differences
Total income tax expense
Reconciliation of tax charge
Profit before tax for the year
Tax at standard UK tax rate of 19% (2019: 19%)
Tax effect of:
Adjustment in relation to prior years
Utilisation of losses brought forward
Permanently disallowed items
Total income tax expense
Income tax (credited)/debited to other comprehensive income
2020
£m
–
(0.3)
0.3
–
1.2
0.2
(0.3)
–
0.1
–
2020
£m
(1.7)
2019
£m
1.2
(0.4)
0.4
1.2
9.0
1.7
(0.4)
(0.1)
–
1.2
2019
£m
(1.2)
The government has recently announced that a main rate of corporation tax will be effective from 1 April 2023, and will be
substantively enacted once the Finance Bill 2021 has received royal assent.
10 Earnings Per Share
(i) Basic Earnings Per Share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the weighted average number of
Ordinary shares in issue during the year.
Earnings:
Profit attributable to owners of the Company
Weighted average number of Ordinary shares in issue (000s)
Basic earnings per share
2020
£m
1.2
42,295
2.87p
2019
£m
7.8
42,145
18.37p
(ii) Diluted Earnings Per Share
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume
conversion of all dilutive potential Ordinary shares. The Company has three categories of dilutive potential Ordinary shares: share
options granted under the Savings Related Share Option Scheme and conditional share awards and options granted under the Equity
Incentive Plan. Further details of these schemes are given in note 19.
For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value (determined
as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to
outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been
issued assuming the exercise of the share options.
86
TClarke Annual Report and Financial Statements 2020
Financial Statements
87
Notes to the Financial Statements continued
For the year ended 31st December 2020
10 Earnings Per Share continued
11 Intangible Assets
Earnings:
Profit attributable to owners of the Company
Weighted average number of Ordinary shares in issue (000s)
Adjustments:
Savings Related Share Option Schemes
Equity Incentive Plan:
Conditional share awards
Weighted average number of Ordinary shares for diluted earnings per share (000s)
Diluted earnings per share
2020
£m
1.2
42,295
295
2,453
45,043
2.69p
2019
£m
7.8
42,145
474
1,654
44,273
17.49p
(iii) Underlying Earnings Per Share
Underlying earnings per share represents profit for the year adjusted for amortisation of intangible assets and other non-underlying
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 attributable to owners of the Company
Adjustments:
Amortisation of intangible assets
Restructuring costs
Underlying earnings
Weighted average number of Ordinary shares in issue (000s)
Adjustments:
Savings Related Share Option Schemes
Equity Incentive Plan:
Conditional Share Awards
Weighted average number of Ordinary shares for diluted earnings per share (000s)
Diluted underlying earnings per share
Basic underlying earnings per share
2020
£m
1.2
0.1
3.0
4.3
2019
£m
7.8
0.2
0.0
8.0
42,295
42,145
295
2,453
45,043
9.66p
10.29p
474
1,654
44,273
17.90p
18.81p
Cost
At 1st January 2019
At 31st December 2019
At 31st December 2020
Accumulated impairment and amortisation
At 1st January 2019
Charge for the year
At 31st December 2019
Charge for the year
At 31st December 2020
Net book value
At 1st January 2019
At 31st December 2019
At 31st December 2020
Other
intangible
assets
£m
Goodwill
£m
27.5
27.5
27.5
(2.2)
–
(2.2)
–
(2.2)
25.3
25.3
25.3
2.9
2.9
2.9
(2.5)
(0.2)
(2.7)
(0.2)
(2.9)
0.4
0.2
–
Total
£m
30.4
30.4
30.4
(4.7)
(0.2)
(4.9)
(0.2)
(5.1)
25.7
25.5
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 operating segments as follows:
Operating segment
London
UK South
UK North
Total
£m
11.3
6.1
7.9
25.3
Value in use
The carrying value of goodwill has been compared to its recoverable amount based on the value in use of the operating segment to
which the goodwill has been allocated, 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 2021 to 2023, which take
into account secured orders, business plans and management actions. The results of the period subsequent to 2023 have been
projected using 2023 forecasts with 2% growth assumed. The extrapolated cash flow projections have been discounted using a pre-tax
discount rate derived from the Group’s cost of capital.
88
TClarke Annual Report and Financial Statements 2020
Financial Statements
89
Notes to the Financial Statements continued
For the year ended 31st December 2020
11 Intangible Assets continued
Assumptions
The key assumptions, to which the assessment of the recoverable amounts of operating segments is sensitive, are the projected
revenue and operating margin to 2023 and beyond, and the discount rate applied. The range of these assumptions applied to the
operating segments is as follows:
Pre-tax discount rate
Average annual revenue growth (2020–2023) (2019: 2019–2022)
London
UK South
UK North
Operating margins (2021–2023) (2019: 2020–2022)
London
UK South
UK North
2020
9.0%
19.2%
8.6%
20.3%
3.9% - 4.0%
3.7% - 4.0%
3.5% - 4.0%
2019
9.5%
3.8%
5.1%
5.7%
4.0%
4.3%
4.3%
Operating margins disclosed for the current year (representing 2021-2023) exclude any allocation of Group costs.
Sensitivities
For each operating segment, 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 operating segment. The sensitivities tested
related to changes in revenue and profit after applying certain lockdown scenarios. This analysis has indicated that no reasonably
possible changes in any individual key assumption would cause the carrying amount of the operating segment to exceed its
recoverable amount.
At 31st December 2020, based on these valuations, no increase in the impairment provision was required against the carrying value
of goodwill (2019: £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.
12 Property, Plant and Equipment
Group
Cost or valuation
At 1st January 2019
Additions
Reclassification
Transfer from depreciation on revaluation
Revaluation
At 31st December 2019
Additions
At 31st December 2020
Accumulated depreciation and impairment
At 1st January 2019
Charge for the year
Reclassifications
Transfer to cost on revaluation
At 31st December 2019
Charge for the year
At 31st December 2020
Net book value
At 1st January 2019
At 31st December 2019
At 31st December 2020
Freehold
properties
£m
Leasehold
improvements
£m
Plant,
machinery
and vehicles
£m
2.8
2.2
0.4
(0.4)
0.4
5.4
0.3
5.7
(0.4)
(0.5)
(0.1)
0.4
(0.6)
(0.5)
(1.1)
2.4
4.8
4.6
2.4
0.7
(0.4)
–
–
2.7
0.2
2.9
(1.2)
(0.6)
0.1
–
(1.7)
(0.5)
(2.2)
1.2
1.0
0.7
3.4
2.9
–
–
–
6.3
0.7
7.0
(2.1)
(1.0)
–
–
(3.1)
(1.2)
(4.3)
1.3
3.2
2.7
Total
£m
8.6
5.8
–
(0.4)
0.4
14.4
1.2
15.6
(3.7)
(2.1)
–
0.4
(5.4)
(2.2)
(7.6)
4.9
9.0
8.0
The net book values shown above at 31st December 2020 reflect the following right-of-use assets: Freehold properties £1.6 million
(2019: £1.8 million) and Plant, machinery and vehicles £1.7 million (2019: £2.3 million). Additions in the year for right-of-use assets were
£0.3 million for Freehold properties (2019: £2.2 million) and £0.6 million for Plant, machinery and vehicles (2019: £2.9 million). The
depreciation charge for right-of-use assets was £0.5 million for Freehold properties (2019: £0.4 million) and £1.2 million for Plant,
machinery and vehicles (2019: £0.6 million).
The Group’s freehold land and buildings were last valued at 31st January 2019 based on an external valuation provided by an
independent valuer. 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 net book value of the freehold properties
on a historic cost basis would have been £3.7 million (2019: 3.9 million).
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 2020 was £3.0 million (2019: £3.1 million).
90
TClarke Annual Report and Financial Statements 2020
Financial Statements
91
Notes to the Financial Statements continued
For the year ended 31st December 2020
13 Investments
Investments comprise:
Cost
At 1st January
Additions
At 31st December
Impairment
At 1st January
At 31st December
Net book value
At 31st January
At 31st December
Company
15 Inventories
2020
£m
53.0
0.2
53.2
(9.6)
(9.6)
43.6
43.6
2019
£m
52.8
0.2
53.0
(9.6)
(9.6)
43.4
43.4
Raw materials and consumables, net of provision (2019: £nil)
16 Construction Contracts
Contract work in progress comprises:
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress payments
Total
Contracts in progress at the reporting date
Gross amounts due from customers
Gross amounts due to customers
Total
2020
£m
0.4
2020
£m
285.2
(244.6)
40.6
41.7
(1.1)
40.6
2019
£m
0.2
2019
£m
302.7
(258.2)
44.5
44.6
(0.1)
44.5
At 31st December 2020, retentions held by customers of the Group for contract work amounted to £19.1 million (2019: £19.4 million).
These amounts are included in trade receivables (see note 17).
Advances received from customers for contract work amounted to £1.1 million (2019: £0.1 million).
Contract balance movements from the prior year closing position were due to events in the normal course of business.
Contract amounts are shown net of impairment of £nil (2019: £nil).
A full list of the Company’s subsidiaries is included in note 28 on page 107. An annual impairment review is undertaken at 31st
December each year in conjunction with the goodwill impairment review (see note 11), using the same underlying cash flow projections
and other key assumptions.
The impairment provision comprises the entire cost of subsidiaries where operations have ceased, or a reduction to recoverable
amount where there has been a significant reduction in underlying trading and significant losses have been incurred, such that the
Group is unable to recover the cost of the investment through its net asset value or future trading.
14 Deferred Taxation
Group
Asset / (liability) at 1st January 2019
Charged to income
Credited to other comprehensive income
Asset / (liability) at 31st December 2019
Charged to income
Credited to other comprehensive income
Asset / (liability) at 31st December 2020
Retirement
benefit
obligation
£m
Revaluations
£m
(0.1)
–
–
(0.1)
–
–
(0.1)
4.0
(0.5)
1.2
4.7
(0.3)
1.7
6.1
Other
£m
–
0.2
–
0.2
–
–
0.2
Total
£m
3.9
(0.3)
1.2
4.8
(0.3)
1.7
6.2
The amount of deferred tax recoverable within one year is insignificant. The deferred tax asset and liabilities have been offset in the
statement of financial position for financial reporting purposes. 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 23).
The deferred tax asset will be recovered over time as the deficit is reduced. There were £0.4m unrecognised deferred tax assets at
31 December 2020 (2019: £nil).
The reported deferred tax assets can be analysed as follows:
Deferred tax liabilities
Deferred tax assets
Total
2020
£m
(0.1)
6.3
6.2
2019
£m
(0.1)
4.9
4.8
92
TClarke Annual Report and Financial Statements 2020
Financial Statements
93
Notes to the Financial Statements continued
For the year ended 31st December 2020
17 Trade and Other Receivables
18 Trade and Other Payables
Group
Company
Group
Company
Trade receivables – gross
Trade receivables – allowances for credit losses
Net trade receivables
Owed by Group companies
Other receivables (including retentions)
Prepayments
Total
Movements in allowances for credit losses
At 1st January
Charged in year
Recovered in year
Written off in year
At 31st December
Trade receivables 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
Total
The ageing of trade receivables past due but not impaired
is as follows
30 days or less
31–60 days
61–120 days
Greater than 120 days
Total
2020
£m
15.3
(0.4)
14.9
–
20.8
2.4
38.1
(0.8)
–
–
0.4
0.4
11.1
0.1
–
–
4.1
15.3
2.7
1.0
–
–
3.7
2019
£m
19.0
(0.8)
18.2
–
22.3
1.4
41.9
(0.7)
(0.2)
–
0.1
(0.8)
14.9
–
–
–
4.1
19.0
2.5
0.3
0.2
0.3
3.3
2020
£m
–
–
–
4.6
–
0.2
4.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2019
£m
–
–
–
2.5
–
0.2
2.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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.
Trade and other receivables are analysed as follows on the
statement of financial position:
Current assets
Non-current assets
Total
Group
Company
2020
£m
34.5
3.6
38.1
2019
£m
36.9
5.0
41.9
2020
£m
4.8
–
4.8
2019
£m
2.7
–
2.7
Current
Trade payables
Owed to Group companies
Other taxation and social security
Accruals
Other payables
Total
Non-current
Trade payables
Owed to Group companies
Total
Trade payables payment terms are as follows:
30 days or less
31 to 60 days
Greater than 60 days
Total
19 Capital and Reserves
(i) Components of Owners’ Equity
The nature and purpose of the components of owners’ equity are as follows:
Component of owners’ equity
Description and purpose
2020
£m
44.1
–
8.1
24.2
1.1
77.5
2.6
–
2.6
27.2
18.7
0.8
46.7
2019
£m
39.3
–
6.1
36.3
1.2
82.9
1.7
–
1.7
26.7
8.7
5.6
41.0
2020
£m
–
–
6.1
–
–
6.1
–
29.9
29.9
–
–
–
–
2019
£m
–
3.2
3.7
–
–
6.9
–
28.3
28.3
–
–
–
–
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.
94
TClarke Annual Report and Financial Statements 2020
Financial Statements
95
Notes to the Financial Statements continued
For the year ended 31st December 2020
19 Capital and Reserves continued
(ii) Share Capital and Premium
Allotted, called up and fully paid (nominal value 10p per share)
At 31st December 2020
At 31st December 2019
All shares rank equally in respect of shareholder rights.
Number of shares
43,052,558
43,052,558
Ordinary
shares
£m
Share
premium
£m
4.3
4.3
3.8
3.8
(iii) 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:
2018 SAYE Scheme
1,146,971
24/10/2018
01/12/2021
to
31/05/2022
Number
of options
Grant date
Exercise date
Exercise
price
Fair value at
date of grant
74.88p
0.3p
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 2020 (2019: £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 £10 to £500 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 participant’s
SAYE contract.
The number of options outstanding during the year were as follows:
At 1st January
Granted
Exercised
Lapsed
At 31st December
2020
Weighted
average
exercise
price (p)
74.88
–
74.88
74.88
74.88
2020
Number
1,321,219
–
(21,736)
(152,512)
1,146,971
2019
Weighted
average
exercise
price (p)
74.28
69.75
74.84
–
74.88
2019
Number
1,666,792
(194,308)
(151,265)
–
1,321,219
The weighted average remaining contractual life of the options at 31st December 2020 was 480 days (2019: 845 days).
19 Capital and Reserves continued
(iv) 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. 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 2020, 2,575,228 conditional share awards were outstanding (2019: 1,616,552) outstanding.
Date of grant
Number of awards
Share price at date of grant
Exercise price
Option life
Conditional
shares
25/04/2018
471,600
83.10p
–
3 years
Conditional
shares
24/04/2019
309,952
130.00p
–
3 years
Conditional
shares
24/04/2019
620,000
130.00p
–
3 years
Conditional
shares
01/05/2020
1,141,676
93.50p
–
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 for the 2018, 2019 and 50% of the 2020 awards, satisfaction of the following performance conditions:
Annual growth rate in underlying 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 The base point is based on average underlying EPS for the three years ending with the year preceding the date of grant.
The remaining 50% of the 2020 performance conditions relate to actions taken by the Executive Directors to enable TClarke to increase
retained reserves for the year ended 31 December 2020 (excluding any impact from pension deficit movements). In addition TClarke
must continue to trade within its normal banking facilities without breaching any covenants. Achievement of this performance condition
was assessed by the Remuneration Committee in March 2021.
(v) 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 a £0.4 million charge for the year ended
31st December 2020 (2019: £0.5 million).
96
TClarke Annual Report and Financial Statements 2020
Financial Statements
97
Notes to the Financial Statements continued
For the year ended 31st December 2020
19 Capital and Reserves continued
(vi) Dividends Paid
Final dividend of 3.65p (2019: 3.34p) per Ordinary share proposed and paid during the year relating
to the previous year’s results
Interim dividend of 0.75p (2019: 0.75p) per Ordinary share paid during the year
Total
2020
£m
1.6
0.3
1.9
The Directors are proposing a final dividend of 3.65p (2019: 3.65p) per Ordinary share totalling £1.6 million (2019: £1.6 million).
This dividend has not been accrued at the reporting date.
20 Notes to the Statement of Cash Flows
(i) Reconciliation of Operating Profit to Net Cash (Outflow)/Inflow from Operating Activities
Operating profit/(loss)
Depreciation charges
Equity-settled share-based payment expense
Amortisation of intangible assets
Pension deficit reduction contribution
Defined benefit pension scheme credit
Operating cash flows before movement in working capital
Movement in inventories
Decrease/(increase) in contract balances
Decrease/(increase) in operating trade and other receivables
(Decrease)/increase in operating trade and other payables
Cash generated from / (used in) operations
Corporation tax paid
Interest paid
Net cash generated from/(used in) operating activities
Group
Company
2020
£m
2.1
2.1
0.4
0.2
(1.5)
(1.7)
1.6
(0.2)
3.9
3.8
(4.5)
4.6
(0.6)
(0.3)
3.7
2019
£m
10.0
2.1
0.5
0.2
(1.5)
(1.3)
10.0
0.1
(14.2)
14.4
(4.6)
5.7
(1.5)
(0.3)
3.9
2020
£m
(0.8)
–
–
–
–
–
(0.8)
–
–
(1.0)
0.8
(1.0)
(0.6)
(0.8)
(2.4)
2019
£m
1.4
0.3
1.7
2019
£m
(3.4)
–
–
–
–
–
(3.4)
–
–
(0.7)
2.3
(1.8)
(1.5)
(0.3)
(3.7)
(ii) Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible into cash,
less bank overdrafts, and are analysed as follows.
Cash and cash equivalents
Group
Company
2020
£m
25.2
2019
£m
12.4
2020
£m
19.0
2019
£m
4.5
21 Bank Overdrafts and Loans
During the year, the Group had in place a £10.0 million overdraft facility and a £15.0 million revolving credit facility (‘RCF’), both with
National Westminster Bank plc. Interest is charged at 1.70% above LIBOR on drawn balances under the RCF and 2.00% above base
rate on overdrawn balances. A fee of 0.68% 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. The RCF is available until 31 August 2024 and the overdraft
facility is renewable annually.
All operating companies within the Group 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 2020, the Group had unused overdraft facilities of £10.0 million (2019: £10.0 million) and had drawn down £15.0
million of the facilities under the RCF. (2019: £15.0 million undrawn). Net cash at 31st December 2020 was £10.2m (2019: £12.4m).
The Group was compliant with its obligations under the RCF and the overdraft facility throughout the year.
22 Related Party Transactions
(i) Directors’ Remuneration
Salaries, fees and other short-term employee benefits
Share-based payment charge
Post-employment benefits
Total
2020
£m
1.9
0.4
–
2.3
2019
£m
2.1
0.3
0.7
3.1
Further disclosures, including details of the highest-paid Director, are included in the Directors’ remuneration report on pages 47 to 54.
(ii) Key Management Remuneration
Compensation payable to key management for employee services is shown below. Key management represents members of the
Group Management Board (excluding Directors).
Salaries, fees and other short-term employee benefits
Share-based payment charge
Post-employment benefits
Total
2020
£m
1.4
0.1
0.1
1.6
2019
£m
1.4
0.1
0.2
1.7
98
TClarke Annual Report and Financial Statements 2020
Financial Statements
99
Notes to the Financial Statements continued
For the year ended 31st December 2020
22 Related Party Transactions continued
(iii) Sales and Purchases of Goods and Services to/from Subsidiaries
The amounts due from and to subsidiaries are disclosed in notes 17 and 18 respectively.
TClarke plc was charged £0.6 million (2019: £2.7 million) by TClarke Services Limited for Group management services and incurred
interest charges of £0.7 million (2019: £0.6 million) on intercompany loans.
(iv) Dividends received from subsidiaries
During the year the Company received a dividend of £4.0m from TClarke Contracting Limited (2019: £6.0 million).
23 Pension Commitments
Defined Contribution Schemes
The Group operates defined contribution pension schemes for all qualifying employees of all its operating companies. The assets of
these schemes are held separately from those of the Group in funds under the control of the trustees.
For part of 2019 the Group also contributed to an industry-wide, multi-employer defined benefit pension scheme on behalf of certain
employees. The assets of the scheme were held separately from those of the Group in an independently administered fund. The plan
exposed 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 did not have access to sufficient information to enable it to use defined benefit accounting. Therefore, the
scheme was accounted for as a defined contribution scheme. The latest formal actuarial valuation as at 5th April 2018 showed that the
scheme had a funding level of 108%. The scheme closed to future accrual during 2019.
The total cost charged to income of £1.9 million (2019: £1.8 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.
The most recent triennial actuarial valuation of the scheme, carried out at 31st December 2018 by R Williams, Fellow of the Institute of
Actuaries, showed a deficit of £24.9 million, which represented a funding level of 59%. 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. Following agreement of the valuation, the deficit reductions contributions of £1.5
million per annum will continue. The Group continues to provide security in the form of a charge over the Group’s property portfolio up
to a combined value of £3.1 million.
From 1st April 2020, the service contribution increased from 21.4% to 22.4% of pensionable payroll (including employee contributions,
which, increased from 10% to 12% of pensionable payroll).
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.
23 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
2020
%
2.60
3.00
1.40
2.90
2020
Years
21.8
24.1
22.8
25.2
2020
£m
76.3
(46.1)
30.2
2019
%
2.45
3.10
2.10
3.15
2019
Years
21.7
23.9
22.7
25.0
2019
£m
70.7
(44.3)
26.4
100
TClarke Annual Report and Financial Statements 2020
Financial Statements
101
Notes to the Financial Statements continued
For the year ended 31st December 2020
23 Pension Commitments continued
The movement in the defined benefit obligation is as follows:
At 1st January 2019
Current service cost
Settlements
Interest expense/(income)
Total
Remeasurements
Return on plan assets, excluding amounts included in interest expense
Change in demographic
Loss from change in financial assumptions
Experience loss
Total
Contributions
Employers
Employees
Payment from plans
Benefit payments
At 31st December 2019
Current service cost
Settlements
Interest expense/(income)
Total
Remeasurements
Return on plan assets, excluding amounts included in interest expense
Change in demographic
Loss from change in financial assumptions
Experience loss
Total
Contributions
Employers
Employees
Payment from plans
Benefit payments
At 31st December 2020
Present value
of obligation
£m
Fair value of
plan assets
£m
58.8
0.9
(3.0)
1.8
(0.3)
–
(0.6)
11.3
2.2
12.9
–
0.6
(1.3)
70.7
0.9
0.4
1.4
2.7
–
0.3
9.3
1.6
11.2
–
0.5
(8.8)
76.3
(35.8)
–
–
(1.1)
(1.1)
(6.0)
–
–
–
(6.0)
(2.1)
(0.6)
1.3
(44.3)
–
–
(0.9)
(0.9)
(4.7)
–
–
–
(4.7)
(4.5)
(0.5)
8.8
(46.1)
Total
£m
23.0
0.9
(3.0)
0.7
(1.4)
(6.0)
(0.6)
11.3
2.2
6.9
(2.1)
–
–
26.4
0.9
0.4
0.5
1.8
(4.7)
0.3
9.3
1.6
6.5
(4.5)
–
–
30.2
Current service cost and settlements are included in administrative expenses.
Interest expense is included in finance costs.
Remeasurement gains and losses have been included in other comprehensive income/expense.
23 Pension Commitments continued
Plan assets are held in professionally managed multi-asset funds, cash and bank accounts managed by the trustees, and an insurance
annuity contract. Plan assets are comprised as follows:
2020
£m
Quoted
£m
Unquoted
UK quoted
Overseas quoted
Hedge funds
Structured and
alternative equities
Total equities
Fixed interest corporate
bonds
Government bonds
Total bonds
Property
Cash
Insurance annuity
contracts
Other
Total
1.7
9.4
–
–
11.1
4.1
21.3
25.4
0.6
3.0
–
–
40.1
–
–
–
–
–
–
–
–
–
0.3
1.8
3.9
6.0
£m
Total
1.7
9.4
–
–
11.1
4.1
21.3
25.4
0.6
3.3
1.8
3.9
2019
£m
Quoted
£m
Unquoted
%
1.7
8.0
5.6
–
15.3
3.2
3.5
6.7
1.0
–
–
–
–
–
–
12.5
12.5
–
–
–
–
3.0
1.8
4.0
24%
55%
1%
7%
4%
9%
£m
Total
1.7
8.0
5.6
12.5
27.8
3.2
3.5
6.7
1.0
3.0
1.8
4.0
%
63%
15%
2%
7%
4%
9%
46.1
100%
23.0
21.3
44.3
100%
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. 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 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 proportion of the assets in equities.
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.
102
TClarke Annual Report and Financial Statements 2020
Financial Statements
103
Notes to the Financial Statements continued
For the year ended 31st December 2020
23 Pension Commitments continued
Inflation Risk
Some of the pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. Caps are in place for
inflationary increases which protect the scheme against the impact of extreme inflation. The majority of the plan’s assets are largely
unaffected by inflation, meaning that any increase in inflation will also increase the deficit.
Life Expectancy
Pension obligations are payable for the life of the member, and where elected by the member, the member’s spouse.
Increases in life expectancy will result in increases in scheme liabilities.
Age Profile
The weighted average duration of the unsecured liabilities is approximately 22 years.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Inflation assumption
Rate of increase in salaries
Rate of increase in pension payments
Life expectancy
Impact on defined benefit obligation
Change in assumption
Increase in assumption
Decrease in assumption
0.5%
0.5%
0.5%
0.5%
1 year
Decrease by 10%
Increase by 7%
Increase by 1%
Increase by 7%
Increase by 5%
Increase by 12%
Decrease by 7%
Decrease by 1%
Decrease by 7%
Decrease by 4%
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 year) 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 year.
24 Obligations Under Leases
In addition to the recognition of right-of-use-assets (note 12) the impact of the Group’s lease arrangements on the financial statements
is shown below.
31st December 2020
Lease liability
Total value of lease payments
Total payments for short-term and low value leases
Interest expense
31st December 2019
Lease liability
Total value of lease payments
Total payments for short-term and low value leases
Interest expense
Freehold
properties
£m
Leasehold
improvements
£m
1.7
0.4
0.4
0.1
–
–
–
–
Freehold
properties
£m
Leasehold
improvements
£m
1.8
0.9
0.4
0.1
–
–
–
–
Plant,
machinery
and vehicles
£m
1.8
1.2
–
–
Plant,
machinery
and vehicles
£m
2.4
1.1
0.1
–
Total
£m
3.5
1.6
0.4
0.1
Total
£m
4.2
2.0
0.5
0.1
25 Contingent Liabilities
Group banking facilities of £25.0 million and surety bond facilities of £40.1 million 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.
26 Financial Instruments
(i) 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 lease
obligations, and equity attributable to equity holders of the Parent Company, comprising issued capital, reserves and retained earnings.
The Group does not use derivative financial instruments.
The capital structure of the Group at 31st December 2020 and 2019 was as follows:
Cash and cash equivalents
Less total borrowings
Net cash
Obligations under leases
Total equity
2020
£m
25.2
(15.0)
10.2
3.5
15.7
2019
£m
12.4
–
12.4
4.2
22.9
(ii) 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. All financial assets and liabilities are level 3 by definition (ie inputs are not based on observable
market data).
104
TClarke Annual Report and Financial Statements 2020
Financial Statements
105
Notes to the Financial Statements continued
For the year ended 31st December 2020
26 Financial Instruments continued
Financial Assets
The Group’s financial assets comprise loans and receivables at amortised cost, and cash and cash equivalents as follows:
31st December 2020
Carrying value
Contractual cash flows
Less than one year
One to two years
Two to three years
More than three years
Total
31st December 2019
Carrying value
Contractual cash flows
Less than one year
One to two years
Two to three years
More than three years
Total
1 Trade and other receivables excludes prepayments.
Cash and cash
equivalents
£m
Trade and other
receivables1
£m
25.2
25.2
–
–
–
25.2
12.4
12.4
–
–
–
12.4
35.7
32.1
2.8
0.6
0.2
35.7
40.5
35.5
4.2
0.5
0.3
40.5
Amounts due
from customers
under
construction
contracts
£m
Total
£m
41.7
102.6
41.7
–
–
–
41.7
44.6
44.6
–
–
–
44.6
99.0
2.8
0.6
0.2
102.6
97.5
92.5
4.2
0.5
0.3
97.5
26 Financial Instruments continued
Financial Liabilities – Analysis of Maturity Dates
At 31st December 2020, the carrying value of the Group’s financial liabilities and maturity profile of the associated contractual cash
flows are shown below. The contractual cash flows are undiscounted and therefore differ from the carrying values which include the
impact of discounting cash flows.
31st December 2020
Carrying value
Contractual cash flows
Less than one year
One to two years
Two to three years
More than three years
Total
31st December 2019
Carrying value
Contractual cash flows
Less than one year
One to two years
Two to three years
More than three years
Total
Amounts due to
customers
under
construction
contracts
£m
Trade and
other
payables1
£m
Obligations
under leases
£m
72.0
69.4
2.4
0.1
0.1
72.0
78.5
76.8
1.5
0.1
0.1
78.5
1.1
1.1
–
–
–
1.1
0.1
0.1
–
–
–
0.1
3.7
1.3
0.9
0.6
0.9
3.7
4.2
1.4
1.2
0.7
1.1
4.4
Total
£m
76.8
71.8
3.3
0.7
1.0
76.8
82.8
78.3
2.7
0.8
1.2
83.0
1 Trade and other payables exclude other taxation and social security.
2 Details of the Group’s banking facilities are given in note 21 on page 97.
(iii) Financial Risk Management
Financial risk management is integral to the way in which the Group is managed. The overall aim of the Group’s financial risk
management policies is to minimise any potential adverse effects on financial performance and net assets.
The Group does not enter into any derivative transactions and has minimal exposure to exchange rate movement as its trade is based
in the United Kingdom.
The financial risks to which the Group is exposed comprise credit risk, market risk and liquidity risk.
The Group seeks to manage these risks as follows:
Credit Risk
Credit risk is the risk that a 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 2020.
106
TClarke Annual Report and Financial Statements 2020
Financial Statements
107
Notes to the Financial Statements continued
For the year ended 31st December 2020
26 Financial Instruments continued
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 May 2020 and comprise a £15.0 million RCF and a £10.0 million overdraft facility.
The RCF is a committed facility available until 31st August 2024 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 2.25%, provided that the Group is utilising its banking facilities, the effect of a delay/acceleration in the
maturity of the Group’s trade receivables at the balance sheet date would be to decrease/increase profit by approximately £0.1 million
(2019: £0.1 million) for each month of delay/acceleration, and the effect of a delay/acceleration in the maturity of the Group’s trade
payables at the reporting date would be to increase/decrease profit by approximately £0.1 million (2019: £0.1 million) for each month
of delay/acceleration. If the facilities are unused, there is no impact on profit.
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 2.00% above base rates. The interest rate on amounts
drawn down under the RCF are fixed at LIBOR plus 1.70% at the time of drawdown for periods of up to six months. The Group’s 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 borrowings at the reporting date would be to increase profits by
approximately £0.1 million (2019: £0.1 million) per annum. Details of the Group’s and the Company’s bank facilities are disclosed
in note 21.
27 Prior year reclassification
The 2019 consolidated statement of financial position has been restated to reclassify trade and other receivables receivable in greater
than one year and trade and other payables payable in greater than one year within non-current assets and non-current liabilities
respectively. Previously these balances had been included within current assets and current liabilities. Reclassified balances including
corresponding amounts at the end of 2018 are as follows:
28 Subsidiary Companies
All subsidiaries are wholly and directly owned by TClarke plc unless otherwise stated, and all are incorporated within the United
Kingdom.
Principal operating company
TClarke Contracting Limited
Group services company
TClarke Services Limited
Property holding company
Weylex Properties Limited
Other operating company
Eton Associates Limited
Non-trading and dormant companies
TClarke Europe Limited (formerly A G Aylward EMS (Maintenance and Minor Works) Limited)
Anglia Electrical Services Limited
D G Robson Mechanical Services Limited
G.D.I. Electrical Co. Limited
J.J. Cross Limited
J.J. Cross Services Limited*
Mitchell and Hewitt Limited
T. Clarke East Limited
TClarke Leeds Limited
TClarke Newcastle Limited
T.Clarke (Northern) Limited
T Clarke North West Limited
T. Clarke (Scotland) Limited
TClarke South East Limited
TClarke South West Limited
Waldon Security Limited**
Type of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Reclassified
Previously Presented
* Shares held by J.J. Cross Limited.
** Shares held by TClarke South West Limited.
Non-current assets
Trade and other receivables
Current assets
Trade and other receivables
Net current assets
Current liabilities
Trade and other payables
Non-current liabilities
Trade and other payables
Total net assets
2020
£m
3.6
34.5
7.6
2019
£m
2018
£m
2020
£m
5.0
7.3
36.9
9.5
49.1
5.4
(77.5)
(82.9)
(85.7)
(2.6)
15.7
(1.7)
22.9
(2.1)
22.1
2019
£m
–
41.9
12.8
2018
£m
–
56.4
10.6
(84.6)
(87.8)
–
22.9
–
22.1
All subsidiary companies have their registered office at 45 Moorfields, London EC2Y 9AE apart from T. Clarke (Scotland) Limited whose
registered office is at 6 Middlefield Road, Middlefield Industrial Estate, Falkirk, Stirlingshire FK2 9AG and T.Clarke (Northern) Limited
whose registered office is at Stanhope House, 116-118 Walworth Road, London SE17 1JL.
The Company elects to take the audit exemption by parent guarantee (under section 479A of Companies Act) with regard to the
financial statements for the year ended 31st December 2020, for the following subsidiary:
• Eton Associates Limited (Company number: 02820813)
•
n/a
n/a
n/a
n/a
n/a
n/a
As part of the reclassification retention balances are now included in other receivables within the trade and other receivables analysis
(previously included within trade receivables).
108
TClarke Annual Report and Financial Statements 2020
Financial Statements
109
Shareholder Information
Company Details
Registered office:
45 Moorfields
London EC2Y 9AE
Telephone: 020 7997 7400
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 investor
section on the website contains information specifically for shareholders, including regulatory announcements and copies of the latest
and past financial statements.
Registrar
The Company’s shareholder register is maintained by our Registrar, Link Group. If you have any queries relating to your TClarke plc
shareholding, you should contact Link Group directly by one of the methods below:
Email: shareholderenquiries@linkgroup.co.uk
Telephone: 0371 664 0300
By post: 10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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 2020.
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
Totals
Shares
Percentage
Holdings
Percentage
7,614,127
33,121,501
2,316,930
43,052,558
999,414
1,056,628
3,694,481
12,016,553
5,442,026
19,843,456
43,052,558
17.69%
76.93%
5.38%
100.0%
2.32%
2.45%
8.58%
27.91%
12.64%
46.10%
100.0%
709
250
26
985
588
144
166
69
8
10
985
71.98%
25.38%
2.64%
100.0%
59.70%
14.62%
16.85%
7.01%
0.81%
1.01%
100.0%
Corporate Broker
Cenkos Securities plc
6 7 8 Tokenhouse Yard
London EC2R 7AS
Tel: 020 7397 8900
Investor Relations
RMS Partners Limited
160 Fleet Street
London EC4A 2DQ
Tel: 020 3735 6551
Independent Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Financial Calendar
Annual General Meeting
5th May 2021
Final Dividend for 2020
Ex-dividend 22nd April 2021
Record date 23rd April 2021
Payment due 21st May 2021
Half Year Results Announcement
20th July 2021
Interim Dividend for 2021
Ex-dividend 2nd September 2021
Record date 3rd September 2021
Payment due 1st October 2021
Trading Update Release
25th November 2021
These dates are indicative only and may be subject to change.
Dividend Reinvestment Plan
A dividend reinvestment plan (‘DRIP’) is available to shareholders. Those shareholders who have not elected to participate in the DRIP
and who would like to do so, should contact our Registrar, Link Group on 0371 664 0381. The last day for election for the final dividend
for 2020 is 30th April 2021.
110
TClarke Annual Report and Financial Statements 2020
TClarke Offices
ABERDEEN
New office to open
in 2021
FALKIRK
DUMFRIES
UK NORTH
NEWCASTLE
LEEDS
LIVERPOOL
MANCHESTER
UK SOUTH
BIRMINGHAM
PETERBOROUGH
DERBY
HUNTINGDON
OXFORD
STANSTED
COLCHESTER
NEWPORT
PORTISHEAD
LONDON
SITTINGBOURNE
ST. AUSTELL
PLYMOUTH
LONDON
For full addresses and contact details for each office, please visit our website at
www.tclarke.co.uk/locations
Designed by: Jon Budd Design Limited
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E N G I N E E R I N G S
45 Moorfields, London EC2Y 9AE | 020 7997 7400 | www.tclarke.co.uk