Half Yearly Report

RNS Number : 7342R

Clarke(T.) PLC

27 August 2010

 



T CLARKE PLC

Interim results for the six months ended 30th June 2010  

T. Clarke plc, the Building Services Group, has announced its interim results for the six months to 30th June 2010.

Highlights:
Revenue	£85.7m (30th June 2009: £93.2m*)
Profit before taxation	£3.2m (30th June 2009: £4.0m*)
Profit before tax margin	3.8% (30th June 2009: 4.3%*)
Underlying operating profit	£3.8m (30th June 2009: £5.1m*)
Underlying operating profit margin	4.5% (30th June 2009: 5.5%*)
Earnings per share	4.57p (30th June 2009: 5.30p)
Earnings per share - continuing	5.65p (30th June 2009: 6.91p*)
Improved order book	£220m (30th June 2009: £170m)
Net cash and deposits of	£7.4m (31st December 2009: £23.2m)
Interim dividend maintained at	4.25 pence per share
Acquisition of D&S Engineering Facilities Ltd
Restructuring of North-West operations
Reduced cost base across the group
Acquisition of DG Robson Mechanical Services
Ltd since the period end
*Restated for discontinued operations - see note 5

Projects won include:

London Bridge Station Concourse; Yorkshire Television, Leeds; Park House, London; John Lewis Croydon and Tunbridge Wells; INTO Newcastle University; Victoria Station Redevelopment; Ravensbourne College, Greenwich; Marks and Spencer, Norwich; Rothschild's, London

Current projects include:

Stratford City Shopping Centre; 2012 Olympic Stadium; Defence Estates Term Contract, USAF Bases; Midlothian Community Hospital; Aspire Defence, Bulford and Tidworth; One New Change; Northern Ballet, Leeds; Palm Beach, Falmouth; HMP Hull; Speedo HQ, Nottingham

Completions include:

Central Saint Giles, London; Machine X, Wandsworth; Pier Walk & Mitre Passage, Greenwich; DLR Three Car Capacity Project; BT Aylesford; HMP New Hall; Wellbar House, Newcastle; Dunston Leisure Centre, Gateshead 

Mark Lawrence, Chief Executive commented:

"I am pleased to report that the Group has maintained its market share in the period and has secured some of the most significant projects available despite a continuing tough and challenging environment.

The Board continues to manage and look for new ways to improve the Group businesses through common controls, systems and procedures.

All of us within the business are focused on securing revenues with acceptable levels for 2011 and beyond, but we must remain vigilant both in terms of risk and opportunities.

We have continued with our strategy to broaden the group activities.  Building on the recent acquisition of D&S Engineering Facilities in March, we announced on 25 August that we had acquired DGR Mechanical Services. We welcome the team at DGR to the Group and look forward to a prosperous future together and being able to offer our clients an even broader range of services.

As a sign of our commitment to shareholders and our confidence in the future and longevity of this business we have taken the decision to maintain the interim dividend."

-ends-

Date 27^th August 2010

For further information contact:

T. Clarke plc
Mark Lawrence, Chief Executive 
Tel: [phone]

www.tclarke.co.uk    

City Profile
Simon Courtenay
Tel: [phone]

Chairman's statement

Despite the current economic climate, these results demonstrate our continued strategic and operational progress. The forward order book is encouraging at £220m (30^th June 2009: £170m) whilst net cash and bank deposits remains positive at £7.4m (31st December 2009: £23.3m).

Our trading update on 5 July 2010 reiterated that the main issue the group faces is the timing and strength of recovery in our markets.  Although conditions remain challenging, our financial strength, depth of capabilities and leading positions across a range of market sectors ensure that we are well placed to seek out and win new and further opportunities in both our existing markets and those markets we do not currently fully serve.

The group has a diversified range of services, an excellent customer base and operates throughout the U.K.  Given the Board's confidence in the long term prospects for the business, the interim dividend is being maintained at 4.25 pence per share.

Russell Race

Chairman

27^th August 2010

Business review

Operational review

T.Clarke - Scotland

Our operations in Scotland suffered sustained pressures on margins as a result of increased competition and the weak economic environment.

In March of this year, recognising the importance of Scotland to the group we re-branded the business T.Clarke. We invested in the period to better position the business within the market sectors that it operates and with the aim of achieving critical mass.

We have also invested in an IT Network Services Division which has the ability to provide a complete service to the client from the design, supply and installation of cabling systems to the supply of active components and after sales service.

Operating out of Scotland, the Network Services Division will serve the UK and will have its own in house technical expertise.

Accreditation has already been achieved for the most widely specified cable systems and the division has been successful in securing Phase 1 of the structured cabling installation at the London 2012 Olympic Stadium.  There are further opportunities on the Olympic Park and among our long term end user clients.

T.Clarke - North

Integration of our acquisition, D&S Engineering Facilities ("D&S") continues to proceed as planned and the division is trading in line with our expectations. We announced previously that we intend to serve the North West region from a single division, D&S, and as a result we have wound down our smaller operation, J.J. Cross, in Preston. All associated restructuring costs have been fully provided for in this period.

Our group businesses in this division are focusing their efforts towards secure and deliverable revenues into 2011 and beyond.

T.Clarke - South

Our London business continues to be successful in securing key projects such as the comprehensive re-development of Victoria Station, the Park House development scheme on Oxford Street and the fit out project for N.M. Rothschild in the city.

Across the South the strategy of maintaining close relationships with existing clients and contractors has resulted in repeat work across a number of sectors, and we continue to bid for new opportunities.

Summary

As stated in our recent trading update, overall the group's businesses continue to trade in line with expectations and our forward order book has strengthened as at 30 June 2010 standing at £220 million (2009: £170 million).

The main issue the group faces is the timing and strength of the recovery in our markets, the final award of a project in this current climate can be protracted. 

Overall the group is operating encouragingly whilst remaining prudent; our outlook for the remainder of 2010 remains cautious but the Board continues to be confident in the long term strengths and resilience of the business.

Outlook

We have secured some of the most significant projects that have come to the market in recent months and we are in discussions as preferred bidder on numerous others. We believe that this is a reflection of the strength of the T.Clarke brand in terms of technical ability, the depth of management and our skilled workforce, underpinned by our positive cash position.

Tendering activity is high across the group and it is particularly encouraging that major commercial schemes in London are being brought to market for construction during 2011 for completion in 2013.

The improved forward order book demonstrates that there continues to be opportunities and that we are able to win new business, but we remain aware that we operate in highly competitive markets where margins continue to be placed under pressure, particularly in the short term.

Uncertainty of the scale and exactly how the Government cuts will affect the construction sector as a whole will not be fully realised until later in the year.  Whilst we are not over dependent on Government funded schemes we could face additional margin pressures in our private sector markets, where we continue to see competition from our contemporaries who previously serviced the public sector.

On 25 August 2010 we announced the acquisition of DG Robson Mechanical Services Limited ("DGR"), a privately owned specialist mechanical services & public health contractor.

Based in Brentwood, Essex focusing on London and the South East, DGR is well known to T. Clarke, having worked together in recent years on projects such as the Westfield London retail development and the refurbishment of the media and broadcasting centre for Associated Press.

This is an important strategic acquisition which enables us to address our clients' changing needs, build upon the group's strong reputation and positions the group for new opportunities requiring a complete "M&E" solution. We are confident that with DGR being part of the group there is an excellent opportunity to improve our service offering and to build upon the scale and number of projects that DGR currently undertakes. In due course we expect the additional services offered by DGR to diversify and enhance the group's earnings profile. 

To address our concerns over the broader economic environment, and ensure that we offer and deliver responsible customer and shareholder value over the longer term, we continue to manage and improve the group businesses through common controls, systems and procedures and remain vigilant both in terms of risk and potential opportunities.  The strength of our reputation and the steps we have taken over the last 12 months to reduce our cost base and reposition the business as a more broadly based service provider lend encouragement for the future profitability of the business.

Mark Lawrence

Chief Executive

27^th August 2010

Financial review                 

Summary of financial performance

The group's performance in the first half reflected trading conditions which remained challenging.  Revenue was down by £7.5m (8%) to £85.7m (2009: £93.2m) and gross profit reduced by £1.7m from £15.4m (16.5%) to £13.7m (16.0%). 

Profit before tax decreased by 19% to £3.2m (2009: £4.0m).  Taxation was £1.0m (2009: £1.2m), and the effective tax rate was 30% (2009: 31%).

Administrative expenses fell by £1.1m to £10.3m (2009: £11.4m), and included £0.2m acquisition expenses, £0.1m amortisation of intangibles assets, £0.2m restructuring charges (2009: £1.1m) and IAS 19 pension charges of £0.1m (2009: credit £0.2m).

Net interest costs were £0.1m (2009: £nil) due to an IAS 19 pension cost of £0.1m (2009: £0.1m) and lower bank interest receipts.

Loss for the period from discontinued operations was £0.4m (2009: £0.6m), after restructuring costs of £0.3m (2009: £0.3m). 

Earnings per share fell 14% to 4.57p (2009: 5.30p).  Earnings per share on continuing operations fell 18% to 5.65p (2009: 6.91p).

From 1^st January 2010 the group has been organised in three regional divisions: South, North and Scotland.  The results of these divisions are considered below.

T.Clarke - South

Revenue in the South fell by £12.1m to £49.3m (2009: £61.4m).  Operating profit increased by £0.3m to £3.2m (2009: £2.9m), representing an increased profit margin of 6.6% (2009: 4.7%).

Underlying operating profit fell by £0.6m to £3.4m (2009:£4.0m), after adjusting for £0.2m restructuring costs (2009: £1.1m).  This represents an operating margin of 7.0% (2009: 6.5%). 

Profit before tax was £3.1m (2009: £2.9m).

T.Clarke - North

Revenue in the North increased by £4.5m to £27.2m (2009: £22.7m), including £4.1m revenue contributed by D&S since it was acquired on 18^th March 2010.  Operating profit increased by £0.7m to £1.0m (2009: £0.3m), including £0.3m contributed by D&S before £0.1m amortisation of intangible assets.  £0.2m of acquisition expenses relating to the D&S acquisition have also been attributed to the North region. 

T.Clarke - Scotland

Revenue in Scotland increased by £0.1m to £9.2m (2009: £9.1m).  Scotland reported an operating loss of £1.1m (2009: profit £0.5m).

Discontinued operations

Following the announcement of its closure the group's operation in Preston has been reclassified as a discontinued operation, and comparatives have been restated accordingly.  Operations that were classified as discontinued at 31^st December 2009 have also been reclassified as discontinued operations in the results for the six months ended 30^th June 2009.

Loss for the period from discontinued operations was £0.4m (2009: £0.6m), after charging redundancy and closure costs of £0.3m (2009: £0.3m).

Cash flow and dividend

Net cash outflow in the period was £10.2m (2009: £6.3m), after dividend payments of £3.5m (2009: £3.5m), net cash outflow on acquisitions of £6.5m and net cash inflow of £5.6m from the maturing of bank deposits.

Net cash outflow from operating activities was £5.7m (2009: £3.6m), due to increased net working capital outflows.   Cash management, and in particular the management of credit risk, are a key area of focus for the group.

Net cash at 30th June 2010 was £2.4m, compared to £12.6m at 31^st December 2010.  Short term deposits stood at £5.6m (31^st December 2009: £10.6m).

The interim dividend has been maintained at 4.25p per share, reflecting the board's confidence in the underlying strength of the business.  The interim dividend will be paid on 8th October 2010 to shareholders on the register at 10^th September 2010 as detailed in note 7.

Acquisitions

The gross cash consideration for the acquisition of D&S was £11.6m, giving rise to goodwill and intangible assets of £8.5m.  Further details are given in note 10.  On 25th August 2010 the group announced the acquisition of DG Robson Mechanical Services Limited ('DGR') for consideration of up to £6.15m.   Further details are given in note 11.

Pension obligations

The post tax deficit on the pension scheme has increased from £6.0m at the year end to £6.2m at 30^th June 2010.  The increase in the net liability arises due to the return on scheme assets being £0.3m lower than expected and a decrease in the discount rate, offset by a reduction in the assumed rate of inflation.  A triennial valuation of the pension scheme as at 1^st January 2010 is in progress.

Martin Walton

Acting Finance Director

27^th August 2010

Consolidated income statement
								Unaudited		Unaudited		Audited
								6 Months to		6 Months to		12 Months to
								30 06 2010		30 06 2009		31 12 2009
								£000		£000		£000
Revenue								85,671		93,180		175,540
Cost of sales								(72,009)		(77,798)		(145,044)
Gross profit								13,662		15,382		30,496
Other operating income								30		29		75
Administrative expenses								(10,345)		(11,431)		(23,295)
Profit from operations								3,347		3,980		7,276
Investment income								80		141		221
Finance costs								(187)		(120)		(238)
Profit before taxation								3,240		4,001		7,259
Taxation								(983)		(1,242)		(2,280)
Profit for the period from continuing operations								2,257		2,759		4,979
Loss for the period from discontinued operations								(430)		(643)		(973)
Profit for the period								1,827		2,116		4,006
Earnings per share:
Attributable to equity holders of T.Clarke plc								4.57 pence		5.30 pence		10.03 pence
On continuing operations								5.65 pence		6.91 pence		12.47 pence
Consolidated statement of comprehensive income
								£000		£000		£000
Profit for the period								1,827		2,116		4,006
Other comprehensive income:
Actuarial (loss) / gain on defined benefit pension scheme								(204)		(2,557)		(5,872)
Tax on items taken directly to equity								57		716		1,644
Other comprehensive (expense) / income for the period, net of tax								(147)		(1,841)		(4,228)
Total comprehensive income  for the period								1,680		275		(222)

Consolidated statement of financial position
	Unaudited		Unaudited		Audited
	30 06 2010		30 06 2009		31 12 2009
	£000		£000		£000
Non current assets
Intangible assets	20,136		12,584		11,775
Property, plant and equipment	6,778		6,663		6,659
Deferred taxation	-		93		93
	26,914		19,340		18,527
Current assets
Inventories	1,232		286		344
Construction contracts	12,930		15,883		11,126
Debtors	22,014		14,921		16,459
Bank deposits	5,043		-		10,660
Cash and cash equivalents	5,241		24,980		12,881
	46,460		56,070		51,470
Total assets	73,374		75,410		69,997
Current liabilities
Bank overdraft and loans	2,871		970		306
Creditors and accruals	39,079		42,080		37,603
Corporation tax liabilities	1,190		1,275		965
Obligations under finance leases	145		200		167
	43,285		44,525		39,041
Net current assets	3,175		11,545		12,429
Non current liabilities
Retirement benefit obligation	6,232		3,655		5,959
Obligations under finance leases	144		137		99
Deferred taxation	630		-		-
	7,006		3,792		6,058
Total liabilities	50,291		48,317		45,099
Net assets	23,083		27,093		24,898
Equity
Share capital	3,995		3,995		3,995
Share premium	1,234		1,234		1,234
Profit and loss account	17,854		21,864		19,669
Total equity	23,083		27,093		24,898

Consolidated statement of cash flows
	Unaudited	Unaudited			Audited
	6 Months to	6 Months to			12 Months to
	30 06 2010	30 06 2009			31 12 2009
	£000		£000		£000
Net cash used in operating activities (see note 9)	(5,716)		(3,648)		(2,586)
Investing activities
Interest received	101		166		187
Cash placed on deposit	-		-		(10,625)
Cash taken off deposit	5,600		-		-
Purchase of property, plant and equipment	(105)		(93)		(205)
Receipts on disposal of property, plant and equipment	59		853		924
Acquisition of subsidiary, net of cash acquired	(6,525)		-		-
Disposal of discontinued operations, net of cash disposed of	-		-		4
Net cash from investing activities	(870)		926		(9,715)
Financing activities
Equity dividends paid	(3,495)		(3,495)		(5,193)
Repayments of obligations under finance leases	(124)		(134)		(292)
Net cash used in financing activities	(3,619)		(3,629)		(5,485)
Net decrease in cash and cash equivalents	(10,205)		(6,351)		(17,786)
Cash and cash equivalents at beginning of period	12,575		30,361		30,361
Cash and cash equivalents at end of period (see note 9)	2,370		24,010		12,575

Consolidated statement of changes in equity
	Unaudited 6 months to			Unaudited 6 months to				Audited 12 Months to
	30 06 2010			30 06 2009				31 12 2009
	£000			£000				£000
Balance at start of period	24,898			30,313				30,313
Profit for period	1,827			2,116				4,006
Actuarial (loss)/gain on defined  benefit pension scheme	(204)			(2,557)				(5,872)
Corporation tax provision on pension benefits	57			716				1,644
Total comprehensive income / (expense) for the period	1,680			275				(222)
Interim dividend paid	-			-				(1,698)
Prior year final dividend paid	(3,495)			(3,495)				(3,495)
Balance at end of period	23,083			27,093				24,898

Notes to the condensed consolidated financial statements for the six months to 30th June 2010

Note 1 - Basis of preparation

T.Clarke plc (the 'company') is a company incorporated in the United Kingdom. The consolidated interim financial statements comprise the condensed financial statements of the company and its subsidiaries (together the 'group').

The interim financial information in this statement does not constitute statutory accounts. The statutory accounts for the year to 31st December 2009 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

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 2009.

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 2009.

Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings.

IFRS 3 (revised) 'Business Combinations' is mandatory for accounting periods beginning on or after 1^st July 2009.  The revised standard continues to apply the acquisition method to business combinations, but makes a number of changes.  All payments to acquire a business are to be recorded at fair value at the date of acquisition, with contingent consideration classified as debt subsequently re-measured through the income statement.  All acquisition costs are to be expensed.

The group has applied IFRS 3 (revised) to business combinations occurring on or after 1^st January 2010.

Note 3 - Segmental information

The group considers that it has only one business segment, being mechanical and electrical contracting and related services.

For management and internal reporting purposes the group was organised into two operating divisions, London and UK Regions, and an internal property division until 31^st December 2009, and the group has previously reported segmental information on that basis.

Following a strategic review, from 1^st January 2010 for management and internal reporting purposes the group has been reorganized into three regional divisions; the South, the North and Scotland, and an internal property division.  Segmental information has been presented on this basis for the six month period ended 30th June 2010, and segmental information for the six month period ended 30^th June 2009 and the year ended 31^st December 2009 has been restated.  All assets and liabilities of the group have been allocated to segments, apart from the retirement benefit obligation and tax assets and liabilities.

The segmental information for the six month period ended 30^th June 2009 and the year ended 31^st December 2009 have been restated to exclude the results of operations reclassified as discontinued operations at 30^th June 2010.

30th June 2010	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	49,291	27,154	9,226	278	(5)	85,944
Inter segment revenue	-	-	-	(273)	-	(273)
Revenue from external operations	49,291	27,154	9,226	5	(5)	85,671
Profit from operations	3,239	996	(1,082)	194	-	3,347
Investment income	71	18	1	-	(10)	80
Finance costs	(180)	(14)	(3)	-	10	(187)
Profit before tax	3,130	1,000	(1,084)	194	-	3,240
Taxation expense						(983)
Profit for the period from continuing operations						2,257
The following amounts are included in profit from operations:
Acquisition expenses	-	161	-	-	-	161
Depreciation	46	194	16	64	-	320
Amortisation	-	100	-	-	-	100
Restructuring charges	249	-	-	-	-	249
Bad debt expense / (credit)	25	(81)	-	-	-	(56)
Assets	33,474	37,796	6,901	5,510	(10,307)	73,374
Liabilities	(28,127)	(16,469)	(3,687)	(4,120)	2,112	(50,291)
Net assets	5,347	21,327	3,214	1,390	(8,195)	23,083
30th June 2009	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	61,381	22,660	9,139	316	-	93,496
Inter segment revenue	-	-	-	(316)	-	(316)
Revenue from external operations	61,381	22,660	9,139	-	-	93,180
Profit from operations	2,890	349	510	231	-	3,980
Investment income	126	30	9	-	(24)	141
Finance costs	(128)	(16)	-	-	24	(120)
Profit before tax	2,898	363	519	231	-	4,001
Taxation expense						(1,242)
Profit for the period from continuing operations						2,759
The following amounts are included in profit from operations:
Depreciation	49	198	24	62	-	333
Restructuring charges	1,099	-	-	-	-	1,099
Bad debt expense / (credit)	368	396	115	-	-	879
Assets	50,147	26,836	7,011	6,171	(14,755)	75,410
Liabilities	(37,650)	(12,901)	(2,555)	(5,127)	9,916	(48,317)
Net assets	12,497	13,935	4,456	1,044	(4,839)	27,083

31st December 2009	South £000	North £000	Scotland £000	Property £000	Unallocated & elimination £000	Total £000
Total revenue	107,976	50,166	17,398	587	(3)	176,124
Inter segment revenue	-	-	-	(584)	-	(584)
Revenue from external operations	107,976	50,166	17,398	3	(3)	175,540
Profit from operations	5,209	580	799	688	-	7,276
Investment income	203	40	12	-	(34)	221
Finance costs	(239)	(31)	(2)	-	34	(238)
Profit before tax	5,173	589	809	688	-	7,259
Taxation expense						(2,280)
Profit for the period from continuing operations						4,979
The following amounts are included in profit from operations:
Goodwill impairment	-	809	-	-	-	809
Depreciation	109	388	58	133	-	688
Amortisation	1,228	90	-	-	-	1,318
Bad debt expense / (credit)	1,060	699	112	-	-	1,871
Assets	41,748	26,067	6,970	5,599	(10,387)	69,997
Liabilities	(28,419)	(13,449)	(2,530)	(4,256)	3,555	(45,099)
Net assets	13,329	12,618	4,440	1,343	(6,832)	24,898

Note 4 - Taxation expense

The taxation charge is calculated by applying the estimated effective annual tax rate to the profit for the period.

Current taxation	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Current year	1,061	1,194	2,317
Prior year	(3)	-	(115)
	1,058	1,194	2,202
Deferred taxation
Arising on:
Current year timing differences	(75)	48	78
	(75)	48	78
Taxation expense	983	1,241	2,280

Note 5 - Discontinued operations

The post tax loss from discontinued operations was determined as follows:

Results of discontinued operations	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Revenue	578	2,627	4,006
Cost of sales	(546)	(2,597)	(3,792)
Gross profit	32	30	214
Administrative expenses	(605)	(928)	(1,482)
Operating loss	(573)	(898)	(1,268)
Investment income	4	-	-
Finance costs	(1)	(3)	(3)
Loss of discontinued operations before taxation	(570)	(901)	(1,271)
Taxation expense	140	258	348
Loss of discontinued operations after taxation	(430)	(643)	(923)
Loss on disposal of discontinued operations	-	-	(50)
Loss on discontinued operations, net of tax	(430)	(643)	(973)
Basic loss per share	1.08 pence	1.61 pence	2.44 pence

The consolidated statement of cash flows includes the following amounts relating to discontinued operations:

	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Operating activities	(434)	(643)	(924)
Investing activities	4	-	1
Financing activities	-	-	(4)
Net cash from discontinued operations	(430)	(643)	(927)

Note 6 - Earnings per share

Earnings per share are calculated on the basis of the weighted average of 39,947,889 ordinary shares in issue (30th June 2009: 39,947,889; 31st December 2009: 39,947,889).

The profit for the period is as follows:	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Profit attributable to equity holders of the group	1,827	2,116	4,006
Loss from discontinued operations attributable to equity holders of the group	430	643	973
Profit from continuing operations attributable to equity holders of the group	2,257	2,759	4,979

Note 7 - Interim dividend

An interim dividend of 4.25p per share (2009: 4.25p) was approved by the board on 26th August 2010 and has not been included as a liability as at 30th June 2010.  The shares will go ex-dividend on 8th September 2010 and the dividend will be paid on 8th October 2010 to shareholders on the register as at 10th September 2010. 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 2010 interim dividend, may do so by contacting Capita Registrars on 0870 162 3131. The last day for election for the interim dividend reinvestment is 13th September 2010 and any requests should be made in good time ahead of that date.

Dividends paid in period	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Final dividends in respect of previous year	3,495	3,495	3,495
Interim dividend in respect of the current year	-	-	1,698
Dividends recognised in the period	3,495	3,495	5,193

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 credit 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:

	Unaudited 30 06 2010 £000	Unaudited 30 06 2009 £000	Audited 31 12 2009 £000
Present value of defined benefit obligations	29,046	21,854	28,005
Fair values of scheme assets	(20,391)	(16,778)	(19,728)
Deficit in scheme	8,655	5,076	8,277
Related deferred tax asset	(2,423)	(1,421)	(2,318)
Liability recognised in the balance sheet	6,232	3,655	5,959
Key assumptions used:
Rate of increase in salaries	4.20%	4.20%	4.70%
Rate of increase of pensions in payment	2.80%	2.90%	3.25%
Discount rate	5.30%	6.20%	5.65%
Inflation assumption	3.20%	3.20%	3.70%
Expected return on scheme assets	6.00%	6.60%	6.45%
Mortality assumptions (years):	Unaudited 30 06 2010	Unaudited 30 06 2009	Audited 31 12 2009
Life expectancy at age 65 for current pensioners:
Men	23.7	23.7	23.7
Women	26.8	26.8	26.8
Life expectancy at age 65 for future pensioners (current age 45)
Men	24.8	24.8	24.8
Women	27.8	27.8	27.8

Note 9 - Notes to the consolidated statement of cash flows

a. Reconciliation of operating profit to net cash from operating activities	Unaudited 30 06 2009 £000	Unaudited 30 06 2008 £000	Audited 31 12 2008 £000
Profit from operations
Continuing operations	3,347	3,980	7,276
Discontinued operations	(574)	(897)	(1,265)
Depreciation charges	320	333	688
Amortisation of intangible assets	100	-	-
Goodwill impairment charge	-	-	809
Defined benefit pension scheme charge / (credit)	20	(270)	(485)
(Profit) / loss on sale of fixed assets	(16)	25	(225)
Operating cash flows before movements in working capital	3,197	3,171	6,798
Decrease / (increase) in inventories	251	6	(81)
Increase in contract balances	(1,804)	(4,628)	(2,340)
(Increase) / decrease  in debtors	(2,706)	(701)	130
Increase in creditors	(3,573)	1,173	(3,216)
Cash generated by operations	(4,635)	(979)	1,291
Corporation tax paid	(1,047)	(2,619)	(3,835)
Interest paid	(34)	(50)	(42)
Net cash from operating activities	(5,716)	(3,648)	(2,586)

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:

	Unaudited 30 06 2009 £000	Unaudited 30 06 2008 £000	Audited 31 12 2008 £000
Cash and cash equivalents	5,241	24,980	12,881
Bank overdrafts	(2,871)	(970)	(306)
	2,370	24,010	12,575

c. Bank deposits

Bank deposits comprise fixed rate deposits with initial maturity dates of six months or more.

Note 10 - Acquisition

On 18 March 2010 the group acquired the entire share capital of D&S (Engineering Facilities) Limited ('D&S'), a facilities management business based in Accrington, specialising in mechanical, electrical and related civil engineering services.  D&S is reported as parted of the North operating segment. 

The group has not yet completed its assessment of the fair value of D&S's assets and liabilities at the acquisition date.  The provisional fair value of the assets and liabilities acquired and the fair value of the consideration are disclosed below:

	Fair value (Unaudited) £000
Intangible assets	2,688
Property plant and equipment	230
Deferred tax	(750)
Inventories	1,079
Trade and other receivables	2,850
Cash and cash equivalents	5,215
Trade and other payables	(5,129)
Corporation tax	(356)
Identifiable net assets	5,827
Goodwill	5,773
Consideration	11,600

The gross contractual amounts of trade and other receivables are not significantly different from their fair values, and no allowance has been made for credit losses.

Intangible assets represent the value attributed to D&S's customer relationships and related contracts.  The principal constituent elements of goodwill are the synergies and opportunities expected to arise from the acquisition and the skilled and accredited workforce employed by D&S, none of which qualify for separate recognition.  The goodwill is not deductible for tax purposes.

The consideration has been settled in cash, including the additional consideration which was paid on agreement of the completion accounts on the basis that cash and net asset targets set out in the sale and purchase agreement had been met.

D&S contributed £4,099,000 revenue, £251,000 profit before tax and amortization of £100,000, and operating cash outflows of £881,000 to the group's results for the 6 months ended 30^th June 2010.  Had D&S been part of the group throughout the reporting period the group's total revenue would have been approximately £95 million and the profit for the period would have been approximately £2.2 million.

The group incurred acquisition costs of £161,000 which have been expensed during the reporting period and included in administrative expenses.

Note 11 - Subsequent events

On 24^th August 2010 the group acquired the entire share capital of DG Robson Mechanical Services Limited ('DGR'), a mechanical services and public health contractor based in Brentwood, Essex, for a total gross consideration of up to £6.15 million.  The consideration comprises £1.875 million to be paid in cash, up to £1.5 million to be paid in cash on a £ for £ basis if net assets at completion exceed £0.5 million, £2,000,000 in 10p ordinary shares in T Clarke plc, and additional consideration of up to £0.775 million to be paid in cash subject to certain earnings targets being met in the 2 years to 24^th August 2012.  The group has not yet completed the accounting for the acquisition and is not in a position to disclose the fair value of the assets and liabilities acquired.

Note 12 - 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 20 to the group's financial statements for the year ended 31st December 2009. There have been no material changes in these relationships in the six months ended 30th June 2010 that have materially affected the financial position or performance of the group during that period.

Note 13 - Risks and uncertainties

Details of the key risks facing the group are included on pages 7, 8, 12 and 13 of the group's annual report and financial statements for the year ended 31st December 2009. Details of further potential risks and uncertainties arising for the six months ended 30th June 2010 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 2010 remain market conditions, operational risk, cost inflation, people, health & safety, credit and liquidity risk, cashflow interest rate risk and risk from pension obligations.

Statement of directors' responsibilities

The directors confirm that the interim management report includes a fair review of the information required by DTR 4.2.7 (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 4.2.8 (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 - Acting Finance Director

27^th August 2010

 

END

 

 

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