Any pipe, any wire, any project, anywhere

Transcription

1 Any pipe, any wire, any project, anywhere Interim financial statements for the six months to 30th June 2012

2 Contents Our businesses 04 Chairman s statement 05 Business review 07 Financial review 09 Condensed consolidated income statement 09 Condensed consolidated statement of comprehensive income 10 Condensed consolidated statement of financial position 11 Condensed consolidated statement of cash flows 11 Condensed consolidated statement of changes in equity 13 Notes to the condensed consolidated financial statements 23 Statement of directors responsibilities Visit to see our businesses, our current projects and project wins. Go to pages 5 and 6 in this interim report to read more about our eight businesses. TClarke is a nationwide building services group delivering mechanical, electrical and ICT engineering services throughout the construction cycle of design, installation, commissioning and facilities management. We deliver the same capability and quality across the UK. Since 1889, we have built and retained a reputation for outstanding delivery. Our focus is on eight business areas where prospects for growth meet our ability to deliver quality, innovation and added value to our clients. Intelligent buildings Facilities management Green technologies Rail Utilities and technologies Manufacturing Residential and hotels M&E contracting Highlights Group Revenue 90.7m 2011: 92.6m Profit before tax 0.5m 2011: 1.4m Profit before tax margin 0.5% 2011: 1.5% Underlying operating profit 1.6m 2011: 2.5m Underlying operating profit margin 1.7% 2011:2.7%

3 Interim financial statements 2012 Our company We are a nationwide building services group. We deliver high levels of value to building projects through the full lifecycle of design, installation, commissioning and maintenance. Our goal is to be recognised as a top five building services contractor in all the sectors in which we operate. To do that we aim to demonstrate value through engineering excellence and innovation in every way. At the same time we are focused on retaining and enhancing our traditional reputation for delivering good value, total trustworthiness and excellent work quality. Earnings per share-basic 0.79p 2011: 2.38p Earnings per share-diluted 0.78p 2011: 2.38p Earnings per share-underlying 2.31p 2011: 3.90p Improved order book 230m 2011: 193m Net cash 0.7m 31/12/2011: 0.6m Interim dividend 1.0p 2011: 1.0p 3

4 Chairman s statement Chairman s statement As reported by most of our peers the first half of 2012 has been marked by a lack of confidence across the sector. Against this backdrop it is unsurprising that the period has been slower than we had hoped with the highly competitive market environment also resulting in pressure on our margins. Underlying operating profits for the period were 1.6m (30th June m). As evidenced by our recent completions and project awards we continue to secure some of the most significant projects that have come to market. Our long standing reputation, financial strength, and the quality and commitment of our people across the UK continues to differentiate TClarke from its competitors. We will continue to target high quality projects supported by respected clients and principal contractors. We continue to take action to mitigate the impact of market conditions and have made further progress with our strategy to adopt a more regionalised approach to our operations. Moving away from individual stand-alone businesses has enabled the group to reduce annual operating costs by 0.6m without impacting our future growth potential. A consistent focus on cash management throughout the period has seen net cash improve, remaining positive at 0.7m (31st December 2011: 0.6m). With a number of projects due to begin shortly we are confident of significant revenue progress in the second half. The Board is extremely pleased to note that the group has one of the strongest forward order books in its history, up 20% to 230m as at 30th June 2012 compared to 193m as at 30th June We see this as strong validation of our strategy to focus on key sectors. Our growing order book provides us with visibility although the margin pressures we face mean that underlying profits will remain subdued and it is highly likely that full year profits will be significantly lower than originally expected. Despite the uncertain environment the Board is proposing a maintained interim dividend of 1.0p (2011: 1.0p) and, in the absence of unforeseen circumstances, expects to maintain total dividends for the year. This reflects both the financial health of TClarke and our confidence in the medium term prospects for the group. Russell Race Chairman 7th August

5 TClarke interim financial statements 2012 Business review Operational review The group is managed in three operational areas, South, North and Scotland. We operate from 16 locations across the UK, the majority of which trade under the TClarke brand. We are focused on eight key sectors in building services: Facilities Management Intelligent Buildings Green Technologies Rail Utilities and Technologies Manufacturing Residential M&E Contracting Helping to build the business and further progress the delivery of our strategy we believe these eight sectors offer good growth potential and will also enable us to develop a stream of recurring revenues as part of our business model. Frustratingly opportunities are taking longer to convert into firm orders, often as a result of a value engineering process. We are however encouraged with the opportunities in data centres, rail and new London commercial office schemes. In addition we are pursuing opportunities to grow the facilities management (FM) and green technologies businesses within the group. TClarke South The South Division is the largest of our three operating divisions and includes our two London businesses. Recently secured schemes include: 3 Quays Residential Development, London 240 Blackfriars commercial office scheme for Great Portland Estates BAE / Detica London & Guildford Brunel University, Uxbridge Credit Suisse UPS Upgrade, London Data Centres in Buckinghamshire, and Northamptonshire DeVere Apartments, Knightsbridge LOCOG Event Maintenance for the London 2012 Olympic Stadium Swansea Metropolitan University University of Bath Schemes in progress include: 20 Fenchurch Street, London Bluewater Shopping Centre, Kent Dungeness Power Station, Kent London Bridge - The Place, London Nazareth House, Plymouth Regents Place - NEQ, London Tate 2 - Transforming Tate Modern, London The Eye, Bristol Turner Broadcasting, London University of Cambridge Sports Hall Victoria Underground Station, London Completions for the first half of the year included The Emirates Airline, the UKs first urban cable car and The Shard, London Bridge. Recognising our capabilities we have been awarded data centre projects in Buckinghamshire, and Northamptonshire and there are a number of other schemes that will be coming to market in the next 18 months for us to pursue. Our order book and tendering opportunities generally remain strong across the division and in the London market there are several large schemes that are now progressing to a construction stage that will be available for bidding later this year or early TClarke North TClarke North West (formerly D&S Engineering Facilities) based in Accrington, specialises in FM. Since becoming part of the TClarke group in March 2010 it has seen revenues grow over 70% with expected revenues of 28m for This has primarily been driven by securing larger contracts and work volumes with its existing clients reassured by the stability that a larger organisation brings. In Redcar, as part of the area s regeneration, we are nearing completion of the Vertical Pier project and have 5

6 Business review Business review continued recently secured the Redcar Leisure and Community Heart, a new development with a sports and leisure centre, swimming pools, business centre and community spaces. Reaffirming our UK data centre capabilities we have secured a data centre in the North East that will be undertaken by our engineers and operatives from Newcastle and Leeds. In the education sector we have completed Campsmount Technology College and are currently on site at the De Warenne Academy, both in Doncaster. INTO University in Newcastle will be completed later this year and we have recently secured Dixons Allerton Academy in Bradford. TClarke Scotland The contracting scene in Scotland remains fiercely competitive and we have continued to streamline our business to achieve the lowest possible cost base, whilst retaining the ability to successfully secure & deliver projects in key sectors. The forward order book remains healthy with targeted revenues for this year achieved and 6m secured for 2013 and beyond. Whilst the market remains very challenging the diversity of services offered is attractive to our core clients and new clients alike. Summary and Outlook Given the challenging conditions it is pleasing to report that the group remains both profitable and cash generative with no debt. The increase in our forward order book is impressive but, as evidenced by government statistics, UK construction activity continues to contract. This indicates that trading will remain challenging and our core markets will continue to face material margin pressure. We believe that economic recovery and a rebound in confidence is key to the return of improved margins. Despite these challenges the Board is focused on delivering value for our customers and shareholders. The actions to reduce our cost base and the strategy of broadening our sector coverage in specific markets have resulted in the group securing some of the most significant projects that have come to the market. We have stated previously that it is a reflection of the strength and confidence of the business that TClarke is selected to work on many prestigious projects. In these continuing uncertain times clients are reassured by our financial strength, service levels and operational stability and we will continue to build upon these client relationships and partnerships as part of our wider plans to grow the business. TClarke Intelligent Buildings from its base in Scotland has strengthened its reputation for IT led projects with clients ranging from the international security market, retail, rail and sports arenas. Residential and engineering markets are proving to be relatively robust and continue to be targeted for growth. A key objective for the next eighteen months is to develop a whole life care solution to end user clients after their NHBC warranty expires, offering security in their domestic household services, which has been met very enthusiastically by our partner s in house building. With an average of 1,000 residential units being completed every year we believe this could be a significant area of growth in the residential sector over the next 5 years. Mark Lawrence Group Chief Executive 7th August

7 TClarke interim financial statements 2012 Financial review Summary of financial performance Revenue decreased by 1.9m (2%) to 90.7m (2011: 92.6m), and gross profit reduced by 1.1m from 12.8m (13.9%) to 11.7m (12.9%). Underlying operating profit fell by 0.9m to 1.6m (2011: 2.5m). Underlying operating profit consists of operating profit before amortisation of intangible assets, profit on disposal of land and buildings, share based payment expense and non-recurring costs totaling 0.9m (2011: 0.9m). Profit before tax decreased by 0.9m to 0.5m (2011: 1.4m). Taxation was 0.1m (2011: 0.4m), and the effective tax rate was 27.8% (2011: 28.3%). Basic earnings per share were 0.79p (2011: 2.38p) and diluted earnings per share were 0.78p (2011: 2.38p). Underlying earnings per share were 2.33p (2011: 3.90p). The results by division are considered below comparatives have been restated to include the results of our Huntingdon and Kings Lynn operations in the South division in accordance with the revised operating structure. Huntingdon and Kings Lynn were previously reported as part of the North division. TClarke South Revenue in the South was 60.7m (2011: 67.1m) and operating profit was 0.2m (2011: 0.6m), reflecting the tough market conditions in the London commercial sector. Underlying operating profit was 0.7m (2011: 1.2m), after adjusting for 0.2m restructuring costs (2011: 0.3m), 0.2m long term employee benefit charges from the acquisition of DG Robson in 2010 (2011: 0.2m) and 0.1m share based payment expenses (2011: nil). TClarke North Revenue in the North increased by 7.3m to 23.2m (2011: 15.9m). Operating profit decreased by 0.5m to 0.6m (2011: 1.1m). Underlying operating profit was 0.9m (2011: 1.3m), after adjusting for 0.2m intangibles amortisation (2011: 0.2m) and 0.1m restructuring charges (2011: nil). TClarke Scotland Revenue in Scotland decreased by 2.8m to 6.8m (2011: 9.6m), reflecting the impact of the restructuring of the business in 2011 to focus on profitable contract opportunities in its core residential, engineering and IT sectors. Underlying operating losses improved to 0.1 million (2011: 0.2m) before restructuring costs of 0.1m (2011: 0.1m). 7

8 Financial review Financial review continued Cash flow Our net cash position improved to 0.7m at 30 June 2012, up 0.1m since the year end. Net cash inflow in the period was 0.1m (2011: 3.8m outflow), after dividend payments of 0.8m (2011: 1.8m). Net cash inflow from operating activities was 1.1m (2011: 1.9m outflow), with an improved working capital position. We are continuing to monitor our cash and working capital position closely. Dividend The interim dividend has been maintained at 1.0p (2011: 1.0p) and will be will be paid on 12th October 2012 to shareholders on the register at 14th September 2012 as detailed in Note 6. Pension obligations The continuing turmoil in the financial markets has again impacted our pension scheme liability, with the deficit increasing by 2.1m in the six months to 30th June 2012 due to the low yield on government bonds. We continue to meet our ongoing funding obligations to the pension scheme, with employers contributions amounting to 0.4m in the first half of the year. Martin Walton Finance Director and Company Secretary 7th August

9 Interim financial statements 2012 Condensed consolidated income statement 6 months to months to Audited 12 months to Revenue 90,725 92, ,805 Cost of sales (79,026) (79,784) (157,718) Gross profit 11,699 12,835 26,087 Other operating income Administrative expenses: Amortisation of intangible assets (170) (245) (491) Non-recurring costs (638) (630) (1,026) Share based payment expenses (57) (31) Other administrative expenses (10,185) (10,419) (21,475) Total administrative expenses (11,050) (11,294) (23,023) Net profit on sale of land and buildings 2,156 Profit from operations 711 1,588 5,364 Finance income Finance costs (269) (227) (481) Profit before taxation 450 1,372 4,900 Taxation (125) (388) (891) Profit for the period ,009 Earnings per share Attributable to equity holders of TClarke plc: Basic 0.79p 2.38p 9.69p Diluted 0.78p 2.38p 9.64p Condensed consolidated statement of comprehensive income Profit for the period ,009 Other comprehensive (expense) / income: Revaluation of land and buildings 768 Actuarial loss on defined benefit pension scheme (1,586) (4) (944) Other comprehensive expense for the period, net of tax (1,586) (4) (176) Total comprehensive (expense) / income for the period (1,261) 980 3,833 9

10 Interim financial statements 2012 Condensed consolidated statement of financial position Audited Non-current assets Intangible assets 23,872 24,288 24,042 Property, plant and equipment 6,267 6,502 6,406 Deferred taxation 2,344 1,746 1,798 32,483 32,536 32,246 Current assets Inventories Amounts due from customers under construction contracts 19,583 17,387 19,210 Trade and other receivables 24,763 23,745 26,429 Cash and cash equivalents 702 4, ,562 46,361 46,704 Total assets 78,045 78,897 78,950 Current liabilities Bank overdraft and loans 1, Amounts due from customers under construction contracts 3,086 1,433 5,354 Trade and other payables 38,203 42,840 37,127 Corporation tax liabilities Obligations under finance leases ,945 46,264 42,952 Net current assets 3, ,752 Non-current liabilities Retirement benefit obligation 12,113 8,853 9,963 Obligations under finance leases Other payables ,201 9,172 10,067 Total liabilities 54,146 55,436 53,019 Net assets 23,899 23,461 25,931 Equity attributable to owners of the parent Share capital 4,140 4,140 4,140 Share premium 3,049 3,049 3,049 Revaluation reserve Retained earnings 15,952 16,272 17,974 Total equity 23,899 23,461 25,931 10

11 Interim financial statements 2012 Condensed consolidated statement of cash flows 6 months to months to Audited 12 months to Net cash used in operating activities (see note 7) 1,090 (1,899) (6,804) Investing activities Interest received Purchase of property, plant and equipment (197) (100) (699) Receipts on disposal of property, plant and equipment ,540 Net cash outflow on acquisition of subsidiaries (349) Net cash (used in) / from investing activities (93) (19) 2,509 Financing activities Equity dividends paid (828) (1,759) (2,174) Repayments of obligations under finance leases (27) (127) (176) Net cash used in financing activities (855) (1,886) (2,350) Net increase / (decrease) in cash and cash equivalents 142 (3,804) (6,645) Cash and cash equivalents at beginning of period 560 7,205 7,205 Cash and cash equivalents at end of period (see note 7) 702 3, Condensed consolidated statement of changes in equity for the six months ended 30th June 2012 Share capital Share premium Revaluation reserve Retained earnings Total At 1st January ,140 3, ,974 25,931 Comprehensive income: Profit for period Other comprehensive income: Actuarial loss on retirement benefit obligation (2,114) (2,114) Deferred income tax credit on actuarial loss on retirement benefit obligation Total other comprehensive expense (1,586) (1,586) Total comprehensive expense (1,261) (1,261) Transfers (10) 10 Transactions with owners: Share based payment credit Dividends paid (828) (828) Total transaction with owners (771) (771) At 30th June ,140 3, ,952 23,899 11

12 Interim financial statements 2012 Condensed consolidated statement of changes in equity for the six months ended 30th June 2011 At 1st January 2011 Comprehensive income Profit for period Other comprehensive income: Actuarial gain on retirement benefit obligation Deferred income tax credit on actuarial gain on retirement benefit obligation Total other comprehensive expense Total comprehensive income Transactions with owners: Dividends paid Total transactions income At 30th June 2011 Share capital 4,140 4,140 Share premium 3,049 3,049 Revaluation reserve Retained earnings 17, (150) (4) 980 (1,759) (1,759) 16,272 Total 24, (150) (4) 980 (1,759) (1,759) 23, Condensed consolidated statement of changes in equity for the year ended 31st December 2011 At 1st January 2011 Comprehensive income Profit for period Other comprehensive income: Revaluation of land and buildings Deferred income tax charge on revaluation of land and buildings Actuarial loss on retirement benefit obligation Deferred income tax credit on actuarial loss on retirement benefit obligation Effect of change in rate of tax Total other comprehensive expense Total comprehensive income Transactions with owners: Share based payment credit Dividends paid Total transactions with owners At 31st December 2011 Share capital 4,140 4,140 Share premium 3,049 3,049 Revaluation reserve 1,023 (270) Retained earnings 17,051 4,009 (1,017) 254 (181) (944) 3, (2,173) (2,142) 17,974 Total 24,240 4,009 1,023 (270) (1,017) 254 (166) (176) 3, (2,173) (2,142) 25,931

13 Notes to the condensed consolidated financial statements For the six months ended 30th June 2012 Note 1 Basis of preparation TClarke plc (the company ) is a company incorporated and domiciled in the United Kingdom. The consolidated interim financial statements comprise the condensed financial statements of the company and its subsidiaries (together the group ). These interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ( IAS 34) as adopted by the European Union, and the Disclosure and Transparency Rules ( DTR ) of the Financial Services Authority. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the group as at and for the year ended 31st December The figures for the year ended 31st December 2011 do not constitute statutory accounts but have been extracted from the group s statutory accounts for that year. The statutory accounts for the year ended 31st December 2011 have been delivered to the Registrar of Companies and a copy has been made available on the company s website at The auditors report on those accounts was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act The interim financial statements have not been audited or reviewed by the company s auditors. Note 2 Accounting policies Except as described below, the financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st December Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings. 13

14 Notes to the condensed consolidated financial statements continued For the six months ended 30th June 2012 Note 3 Segmental information The group provides electrical and mechanical contracting and related services to the construction industry and end users. For management and internal reporting purposes the group is organised geographically into three regional divisions; the South, the North and Scotland, and an internal property division, reporting to the Chief Executive, who is the chief operating decision maker. All assets and liabilities of the group have been allocated to segments, apart from the retirement benefit obligation and tax assets and liabilities. With effect from 1st January 2012 the management of the Huntingdon and Kings Lynn offices has been transferred to the South division. Previously these operations were reported as part of the North division. Comparative information has been restated. 30th June 2012 South North Scotland Property Unallocated & elimination Total Total revenue 67,281 23,276 7,273 97,830 Inter segment revenue (6,615) (490) (7,105) Revenue from external operations 60,666 23,276 6,783 90,725 Underlying profit from operations (108) 118 1,577 Amortisation of intangibles (170) (170) Share based payment expense (57) (57) Nonrecurring costs: Restructuring charges (202) (96) (129) (427) Long-term employee benefits arising from previous acquisitions (212) (212) Profit from operations (237) Investment income (30) 8 Finance costs (295) (4) 30 (269) Profit before tax (77) 650 (241) Taxation expense (125) Profit for the period from continuing operations 325 Assets 47,690 21,801 6,074 4,780 (2,300) 78,045 Liabilities (32,664) (8,395) (3,135) (1,968) (7,984) (54,146) Net assets 15,026 13,406 2,939 2,812 (10,284) 23,899 14

15 TClarke interim financial statements 2012 Note 3 Segmental information continued 30th June 2011 (restated) South North Scotland Property Unallocated & elimination Total Total revenue 67,171 15,872 9,836 92,879 Inter segment revenue (69) (12) (179) (260) Revenue from external operations 67,102 15,860 9,657 92,619 Underlying profit from operations 1,190 1,290 (202) 185 2,463 Amortisation of intangibles (75) (170) (245) Nonrecurring costs: Restructuring charges (312) (106) (418) Long-term employee benefits arising from previous acquisitions (212) (212) Profit from operations 591 1,120 (308) 185 1,588 Investment income 2 25 (16) 11 Finance costs (234) (5) (4) 16 (227) Profit before tax 359 1,140 (312) 185 1,372 Taxation expense (388) Profit for the period from continuing operations 984 Assets 48,622 22,099 8,591 5,080 (5,495) 78,897 Liabilities (38,519) (5,985) (5,525) (3,330) (2,077) (55,436) Net assets 10,103 16,114 3,066 1,750 (7,572) 23,461 15

16 Notes to the condensed consolidated financial statements continued For the six months ended 30th June 2012 Note 3 Segmental information continued 31st December 2011 (restated) South North Scotland Property Unallocated & elimination Total Total revenue 132,980 34,547 17, ,601 Inter segment revenue (671) (52) (73) (796) Revenue from external operations 132,309 34,495 17, ,805 Underlying profit from operations 2,700 2,263 (568) 361 4,756 Net profit on disposal of land and buildings 2,156 2,156 Amortisation of intangibles (150) (341) (491) Share based payment expense (31) (31) Nonrecurring costs: Restructuring charges (421) (35) (147) (603) Long-term employee benefits arising from previous acquisitions (423) (423) Profit from operations 1,675 1,887 (715) 2,517 5,364 Investment income (55) 17 Finance costs (528) (8) 55 (481) Profit before tax 1,172 1,923 (712) 2,517 4,900 Taxation expense (891) Profit for the period from continuing operations 4,009 Assets 54,572 21,122 7,141 4,809 (8,694) 78,950 Liabilities (34,030) (12,495) (4,578) (2,116) 200 (53,019) Net assets 20,542 8,627 2,563 2,693 (8,494) 25,931 Note 4 Taxation expense The effective income tax rate applied for the period is 27.8% (30th June 2011: 28.3%; 31st December 2011: 18.4%) 16

17 TClarke interim financial statements 2012 Note 5 Earnings per share A. Basic earnings per share The earnings per share represents the profit for the period divided by the weighted average number of ordinary shares in issue Audited Profit attributable to equity holders of the parent ,009 Weighted average number of ordinary shares (000s) 41,400 41,400 41,400 B. Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has three categories of dilutive potential ordinary shares: share options granted under the Savings Related Option Scheme, and share options and conditional share awards granted under the Equity Incentive Plan. Further details of these schemes are given in Note 20 of the 2011 annual report and financial statements Audited Profit attributable to equity holders of the parent ,009 Weighted average number of ordinary shares in issue 41,400 41,400 41,400 Adjustments: Savings Related Share Options 74 Equity Incentive Plan Weighted average number of ordinary shares for diluted earnings per share (000s) 41,844 41,411 41,540 17

18 Notes to the condensed consolidated financial statements continued For the six months ended 30th June 2012 Note 5 Earnings per share continued C. Underlying earnings per share Underlying earnings per share represents the profit for the period from continuing operations adjusted for goodwill impairment, amortisation of intangible assets, acquisition expenses, other long-term employee benefit costs and restructuring costs, divided by the weighted average number of ordinary shares in issue. The number of ordinary shares for the purpose of this calculation is 41,399,795 (30th June 2011: 41,399,795; 31st December 2011: 41,399,795). The underlying profit for the period is calculated as follows: Audited Profit from continuing operations attributable to equity holders of the parent ,009 Adjustments: Amortisation of intangible assets Long term employee benefits arising from previous acquisitions Restructuring costs Equity settled share based payment expense Net profit on disposal of property assets (2,156) Tax effect of adjustments (226) (245) (353) Underlying profit after tax from continuing operations 965 1,614 3,048 Weighted average number of ordinary shares in issue 41,400 41,400 41,400 Adjustments: Savings Related Share Options 74 Equity Incentive Plan Weighted average number of ordinary shares for diluted earnings per share (000s) 41,844 41,411 41,540 Underlying earnings per share 2.33p 3.90p 7.34p Diluted underlying earnings per share 2.31p 3.90p 7.33p 18

19 TClarke interim financial statements 2012 Note 6 Interim dividend An interim dividend of 1.0p per share (2011: 1.0p) was approved by the board on 6th August 2012 and has not been included as a liability as at 30th June The shares will go ex-dividend on 12th September 2012 and the dividend will be paid on 12th October to shareholders on the register as at 14th September A dividend reinvestment plan is available for shareholders. Those shareholders who have not elected to participate in this plan, and who would like to participate with respect to the 2012 interim dividend, may do so by contacting Capita Registrars on The last day for election for the interim dividend reinvestment is 17th September 2012 and any requests should be made in good time ahead of that date. Dividends paid in period Audited Final dividends in respect of previous year 828 1,760 1,760 Interim dividend in respect of the current year 414 Dividends recognised in the period 828 1,760 2,174 19

20 Notes to the condensed consolidated financial statements continued For the six months ended 30th June 2012 Note 7 Notes to the consolidated statement of cash flows A Reconciliation of operating profit to net cash from operating activities Audited Profit from continuing operations 711 1,588 5,364 Depreciation charges Equity settled share based payment expense Amortisation of intangible assets Defined benefit pension scheme credit (175) (306) (549) Profit on sale of fixed assets (54) (5) (2,128) Operating cash flows before movements in working capital 1,065 1,829 3,840 (Decrease) / increase in inventories (73) Increase in contract balances (2,640) (6,209) (4,111) Decrease / (increase) in debtors 1,666 (335) (3,019) Increase / (decrease) in creditors 1,066 3,900 (1,661) Cash generated by / (used in) operations 1,084 (766) (4,941) Corporation tax paid 55 (1,101) (1,781) Interest paid (49) (32) (82) Net cash generated by / (used in) operating activities 1,090 (1,899) (6,804) B. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that readily convertible into cash, less bank overdrafts, and are analysed as follows: Audited Cash and cash equivalents 702 4, Bank overdrafts (1,426) (64) 702 3,

21 TClarke interim financial statements 2012 Note 8 Pension commitments The present value of the defined benefit pension scheme and the related past and current service costs were measured using the projected unit method. The amount included in the balance sheet arising from the group s obligations in respect of its defined benefit retirement scheme is as follows: Audited Present value of defined benefit obligations 36,464 32,135 33,590 Fair values of scheme assets (24,351) (23,282) (23,627) Deficit in scheme recognised in the statement of financial position 12,113 8,853 9,963 Key assumptions used: Rate of increase in salaries 3.10% 4.50% 3.40% Rate of increase of pensions in payment 2.25% 3.10% 2.55% Discount rate 4.35% 5.50% 4.80% Inflation assumption 2.60% 3.50% 2.90% Expected return on scheme assets 5.00% 6.10% 5.00% Audited Mortality assumptions (years): Life expectancy at age 65 for current pensioners: Men Women Life expectancy at age 65 for future pensioners (current age 45) Men Women

22 Notes to the condensed consolidated financial statements continued For the six months ended 30th June 2012 Note 9 Related party transactions Transactions between the company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Full disclosure of the group s other related party transactions is given in Note 23 to the group s financial statements for the year ended 31st December There have been no material changes in these relationships in the six months ended 30th June 2012 that have materially affected the financial position or performance of the group during that period. Note 10 Risks and uncertainties Details of the key risks facing the group are included on pages 11 to 13 of the group s annual report and financial statements for the year ended 31st December Details of further potential risks and uncertainties arising for the six months ended 30th June 2012 are included within the Chairman s statement and the Business and Financial Reviews as appropriate. The directors consider that the main areas of risk and uncertainty with respect to the remainder of 2012 remain market conditions, operational risk, cost inflation, people, health & safety, credit and liquidity risk, cash flow interest rate risk and risk from pension obligations. 22

23 TClarke interim financial statements 2012 Statement of directors responsibilities The directors confirm that the interim management report includes a fair review of the information required by DTR (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and DTR (disclosure of related party transactions and changes therein). The directors also confirm that the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and present a true and fair view of the assets, liabilities, financial position and profit of the group. On behalf of the board R J Race Chairman M Lawrence Chief Executive M R Walton Finance Director 7th August

24 TClarke plc 45 Moorfields London EC2Y 9AE