FIVE YEARS OF CONTINUOUS IMPROVEMENT
19/3/20: TClarke announces its preliminary results for the year ended 31st December 2019.
Iain McCusker, Chairman commented:
“The Group is in great shape. The results for the year were very encouraging and we have an excellent platform from which we will continue to make progress. Clearly these results will be overshadowed by the global Coronavirus pandemic. We as a business continue to follow the UK Government’s advice and direction and until the situation stabilises it is not possible to forecast the short-term impact on our industry.
“It is worth reminding our stakeholders that the Group has a proud 130-year history and overcome many challenges. During this time, we have built a first-class reputation for quality and being at the forefront of technological innovation within our sector.
Overall, TClarke is in a robust financial position and we remain optimistic about the long-term future positioning in our marketplace and we are well placed to face the challenges ahead.”
2019 was another highly successful year for TClarke. Underlying earnings per share increased by over 22% to 18.81p and underlying operating profit increased by 16% to £10.2 million.
I am particularly pleased that the Group achieved its target of 3% operating margin for the year and showed improvement across a number of key financial measures.
The forward order book continues to be very healthy and this, together with the strategic market initiatives which the Group will implement in 2020, gives confidence as to forward revenue and earnings potential. As a result, the Board is recommending a total dividend of 4.4p for the full year, an increase of 10% over 2018. The Board remains committed to a progressive dividend policy.
Whilst we will continue to grow our core business of delivering successful, high-quality, complex projects, we will also be delivering some key market developments in 2020 to meet the growing and changing requirements of our existing and new customer bases. A combined focus on our core business and the delivery of new offerings in 2020, particularly in Technology Solutions and expansion into Europe, provides exciting potential and opportunity for ongoing performance growth.
The TClarke brand is very strong, built upon its reputation for high technical capability, quality, dependability and performance. However, such brand value can only be created and maintained through the high qualities of our people and their engineering capabilities, and by the ongoing relationships with and support of our customers and supply chain. I would like to thank all of them for enabling TClarke to grow and flourish.
19th March 2020
Chief Executive’s report
Last year we celebrated 130 years of TClarke. This year the theme for our Annual Report is ‘In Touch With Tomorrow’ because whilst 2019 has been a pivotal year we are very much focused on the future.
A starting point for the future and clear measure of our ability to command market share is our forward order book which stands at £403 million (2018: £411 million). This near record order book has been replenished whilst maintaining our disciplined and selective bidding approach to opportunities.
Having achieved our important objective of a 3% margin going forward, we will continue to instill a discipline that ensures we evaluate every potential bid and monitor each phase of our projects to ensure this level of margin is sustained.
Understand our growth strategy
Whilst our margin target remains one of the cornerstones of our strategy, we also have clear objectives that will deliver revenue growth.
In London we will continue to target larger mechanical and ‘full service’ M&E and technology packages. By way of an example, during 2019 we have been delivering our largest ever mechanical project – the iconic KGX1 project at Kings Cross. Our capacity to deliver M&E projects in London has more than doubled within the last five years.
Last year we reported exceptional growth in technologies, and this looks set to continue in the coming year. Our offerings in this sector are extensive and comprehensive. To complement our M&E installations we now offer our clients added value packages such as IT Networks, audio visual, fire and security, building control installations as well as a suite of products to make buildings more efficient and fit for the 21st century. Our in-house DfMA (Designed for Manufacture and Assembly) facility at Stansted is a TClarke USP in what we can offer our client in terms of offsite precision manufacturing embracing modular innovation and digital solutions.
Outside London our regional businesses have been targeting larger M&E projects which fit our margin profile, taking our existing client partnerships into our new regions such as Manchester and Liverpool. Our offices in the North of the UK are particularly well positioned to take advantage of planned infrastructure investment and regeneration that schemessuch as HS2 will bring to these areas.
Capitalising on our extensive UK experience in 2019, we launched our European data centres division. The global demand for data centres and for building services teams that can deliver them will dwarf so many areas of infrastructure development in the next ten years. The European market is highly attractive, we have the proven skillsets, we also have long-term partners in the sector who have been actively encouraging us to participate in these markets. Our bidding teams have been actively targeting projects in selective European territories as well as numerous opportunities in the UK and we are confident that these will be a feature in our future order book.
These are just some examples of the strategies that we are following that have the ability to create a significant, permanent uplift in our revenue figures. Each is framed by our margin target, risk profile and ability to deliver with our own resources to the quality standards we require; in other words, these are well-planned and disciplined strategies.
See how construction markets are moving our way
Travelling through London you will see that TClarke is truly the contractor of choice on the most significant schemes under construction including projects at Battersea Power Station, One Nine Elms, The Peninsula Hotel, KGX1 in Kings Cross and Oxford House in Oxford Street. We are also involved with no fewer than four major schemes in the heart of the City at 8, 22, 100 and 150 Bishopsgate. Clients need to lock in the resource of skilled people to deliver their complex projects, which is why we are pleased they look to our teams here at TClarke.
Understand the central value of our people strategy
This year the first cohort of 27 young leaders completed our Future Leaders programme and the second cohort of 11 began their three years of development, networking and training. The reason why TClarke in 2019 won 90% of its work from repeat clients is because of the exceptional quality of our teams. Our people deliver quality, collaboration, safety and expertise. We directly employ, enabling lifelong careers from which the business benefits hugely. In 2019 we introduced a wide series of measures and made investments to improve the support we give our people – from a new Employee Hub, to mindfulness sessions, to the setting up of a strengthened HR team led by our HR Director, Mick Jobling. Succession planning and the ongoing flow of talent into the business are key and 2019 has seen major progress in both areas. I am particularly proud of leading a business where we currently have 244 people employed in their apprenticeship or studying for degrees or professional qualifications – representing 17.8% of our workforce against the construction industry as a whole which sees 5% as the gold standard.
Feel the confidence
It is pleasing that there is no shortage of new opportunities being released in our five target markets. There is genuine confidence across TClarke and I congratulate the people of TClarke, who have understood the strategy and delivered it, maintaining and building our reputation, day by day. They deserve enormous credit and the highest possible standards and commitment to safety; I am pleased to conclude my report by reconfirming the fact that safety is our overriding priority and focus. Health, safety and wellbeing matter more than anything else.
Group Chief Executive Officer 19th March 2020
Group Financial review
The Group has a track record of delivering stable and improving results. Over the last five years underlying operating profit has risen each year from £4.6 million in 2015 to £10.2 million in 2019. Underlying earnings per share has risen from 7.11p in 2015 to 18.81p in 2019.
The Group’s underlying performance for the year ended 31st December 2019 was strong, resulting in an increase in earnings per share of 22.3% to 18.81p (2018: 15.38p). This growth has been as a result of TClarke achieving an operating margin of 3% (2018: 2.7%) whilst at the same time growing revenues by 2% to £334.6 million (2018: £326.8 million). The statutory operating profit was £10.0 million (2018: £8.6 million). As in 2018, all regions were profitable with London remaining the core of the business delivering a reported profit of £8.2 million (2018: £7.2 million) and an operating margin of 4.1% (2018: 3.7%).
Finance costs increased to £1.0 million (2018: £0.8 million) as a result of an increase in the Group’s defined benefit pension scheme interest charge of £0.1 million to £0.7 million (2018: £0.6 million) and an interest charge of £0.1 million following the adoption of IFRS 16.
The tax charge for the year is £1.2 million (2018: £1.6 million), which equated to an effective tax rate of 13%. This is lower than the UK statutory rate of 19 % due to utilising brought forward Eton tax losses, Eton RDEC claim and prior year tax adjustments. TClarke maintains an open and transparent working relationship with HMRC.
The Board is proposing a final dividend of 3.65p (2018: 3.34p), with the total dividend for the year increasing by 10% to 4.4p (2018: 4.0p). The dividend is covered four times by underlying earnings. The increase in dividends is in line with TClarke’s progressive dividend policy.
Year-end cash was £12.4 million (2018: £12.4 million) with the Group being free of any debt. We move into 2020 with a forward order book at £403 million (2018: £411 million) providing excellent revenue visibility.