Building innovation Building relationships Building services Interim financial statements for the six months to 30th June 2014
Highlights Group revenue 109.8m 2013 : 114.7m Forward order book 275m 2013 : 225m Underlying operating profit 1.2m 2013 : 1.2m Profit before tax m 2013 : m Profit before tax margin % 2013 : 0.7% Underlying Earnings per share 1.58p 2013 : 1.50p Earnings per share 0.32p 2013 : 1.23p Dividend per share 0.5p 2013 : 1.00p Contents 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 12 Condensed consolidated statement of changes in equity 14 Notes to the condensed consolidated financial statements 23 Statement of directors responsibilities 2
www.tclarke.co.uk Building innovation Building relationships Building services Our company We are a nationwide building services contractor delivering the full range of mechanical, electrical and ICT services from strong local teams across the country. Our focus is on being a top five contractor in each of the specialist areas we work in - and equally on the retention and enhancement of our traditional reputation for delivering good value, total trustworthiness and excellent work quality. Our businesses Visit www.tclarke.co.uk to see our businesses, our current projects and project wins. 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 nine business areas where prospects for growth meet our ability to deliver quality, innovation and added value to our clients. Design & build The one-stop in-house service Residential & hotels Industry-leading one-stop solutions M&E contracting Our core business nationwide Mission critical Critical data & power projects Manufacturing services In-house precision prefabrication Transport Our dedicated rail and airport division Green technologies Full catalogue of green capabilities Facilities management Residential, public sector and engineering FM Intelligent buildings High quality in-house ICT services 3
Interim report Chairman s statement Update on Issues We made reference to two specific issues within our 2013 results statement, an update is provided below. A subsidiary company was one of a number of parties that were subject to a substantial damages claim in respect of work carried out in 2007 before it was acquired by the group. Damages were awarded against the company, which were settled by the company's insurers. However, following an unsuccessful appeal the apportionment of costs exceeded the insurance cover in place. The subsidiary company has entered into dialogue with the other party in order to negotiate a full and final settlement. We have received legal advice that the award notification may not, of itself, cause a breach of the group's obligations under its banking facilities. Whilst this legal view has not been confirmed with our bankers, they have provided us with an indication that they remain supportive and have no current intention to withdraw facilities as a consequence of the award. We reported previously that we completed a major project in our Mission Critical division and that the final account settlement was proving difficult to conclude. At this stage discussions are progressing at a senior level with the principal contractor. We also continue to progress closing out the accounts of our downstream supply chain. Further updates on both these issues will be provided as appropriate. Financial Results The underlying operating profit for the six months was 1.2m (30th June 2013: 1.2m), with revenues of 109.8m (30th June 2013: 114.7m). Our cash position was adversely affected throughout the period due largely to the delayed settlement of the Mission Critical project referred to above. Our cash position was 0.7m as at 30th June 2014. Further details are provided in the financial review. The board remains confident about the future prospects for the business but at this stage is proposing an interim dividend 0.5p (2013: 1.0p). This will be paid on 10th October 2014 to shareholders on the register as at 12th September 2014. Outlook Encouragingly our forward order book, which has been replenished and strengthened, now stands at 275m, an increase of over 22% compared to the same time last year (30th June 2013: 225m). Overall 90% of our targeted revenues for 2014 have now been secured and we are at an advanced stage of negotiation on a number of high profile schemes particularly in our London businesses that will start on site in 2015. In common with others who operate in our markets, current trading remains sluggish, affected by the slower than anticipated progress of some projects that will fuel our wider recovery. Whilst there are positive signs of improvement and we expect to see continued opportunities for growth next year we still maintain it will be late in 2015 before we begin to see the benefits of the recovery translating into improved margins. David Henderson Chairman 5th August 2014 4
Interim report Business review Operational review The group is managed in three operational areas, South, North and Scotland and to provide nationwide coverage we operate from 16 locations across the UK, the majority of which trade under the TClarke brand. Recent improvements that continue to strengthen the operational focus of our business include the further centralisation of our payroll, procurement and accounts departments. In addition we have strengthened our Financial Control department which reinforces our procedures for project reporting. Management changes have also taken place in Kent, Leeds and our operations in the South West. Our strategy is to focus on eight key sectors in building services: Facilities Management Intelligent Buildings Green Technologies Transport Mission Critical Manufacturing Residential M&E Contracting A ninth sector was added this year with the introduction of our high quality in-house Design & Build operation based in Colchester focusing on opportunities in London and the Home Counties. We expect meaningful contributions from this division next year, but so far we are pleased with the initial enquiry levels that are being received. As we return to more normal times and opportunities begin to present themselves for growth we are mindful of the ongoing risks to our business. Risks such as wage inflation will become more prominent as is normal during any period of growth fuelled by concerns about resource shortages in the medium term. Concerns about resources could become an opportunity for TClarke. We are already seeing some of our proactive clients wishing to take advantage of our directly employed skilled operatives and our very competent engineering teams at a far earlier stage of the procurement process than has been the norm during the recession. Our forward order book now stands at a strengthened 275m with good visibility through 2015 having already secured 122m, although some revenues for 2015 are a result of contract slippage from 2014. Our contracts at London Underground's Victoria and Bank Stations have visibility through to 2017 and 2021 respectively. The group s forward order book from July 2014 breaks down as follows: July December 2014 97m Secured to date 2015 122m Secured to date 2016 2021 56m Secured forward order book 275m 5
Business review TClarke - South The South Division is the largest of our three operating divisions and includes our combined M&E London business as well as with Bristol, Cardiff, Colchester, Derby, Harlow (Manufacturing Facility), Huntingdon, Peterborough, Plymouth, Sittingbourne and St Austell. Targeted revenues are lower than at the same period than last year, the slippage is predominantly in our London businesses which has been affected by the slower than anticipated progress of new projects and in Kent where over aggressive bidding is still prevalent. We have taken steps to reduce costs at our Kent business with additional support where necessary now being given from the London Head Office. Excellent progress has been made promoting our combined TClarke M&E offering in London. Projects where combined M&E packages have been secured include Arc Academy, Putney; BBC White City, London; BP Sunbury; Romford ROC (Rail Operating Centre); Selfridges Duke Street Project; and 450 South Oak Way, Reading. Our South West operations are run from St Austell and Plymouth. A new management team was promoted from within from the start of June. The team at St Austell also moved into new premises from July which reinforces our commitment to the area and we believe will be the springboard for future opportunities and growth. TClarke - North The North Division has three locations. Accrington and Newcastle have performed well in the first half. Leeds reported a performance that was slightly behind year on year; it has secured just under 60% of targeted revenues. In addition effective 1st July 2014 the Managing Director responsible for our successful business in Newcastle has assumed responsibility for Leeds. Going forward we believe that this will afford greater opportunities to share resources and make use of a combined client base. This is in line with our objective of having more of our local office locations managed under a regional management structure. We continue to work extensively for BAE Systems at Warton and Samlesbury. We have now secured contracts at Barrow-in-Furness where there is huge planned expenditure associated with the Trident successor programme which could lead to further significant opportunities in the medium term. TClarke - Scotland In Scotland, we operate from our main office in Falkirk and a regional office in Aberdeen. 82% of targeted revenues for 2014 are now secured. One of the strengths of our Scottish operations is how it excels in the residential sector and is the contractor of choice to the leading house builders in the Scottish market. During this year we expect to complete 1,500 residential units whilst a further 900 for 2015 have already been secured. As part of its growth strategy TClarke Scotland continues to seek opportunities in the wider M&E sector building upon the success of the work being undertaken at First Bus in Glasgow and Castlecrags Centre in Edinburgh. Our FM/Engineering division continues to develop its client base with end users Scottish Prisons, Diageo, Balfour Beatty Utilities and BAE Systems. Mark Lawrence Group Chief Executive 5th August 2014 6
Financial review Financial review Summary of financial performance Revenue was 109.8m (2013: 114.7m), gross profit was 11.7m (margin: 10.5%) (2013: 11.4m, margin: 9.9%), with work volumes in the South being hit by the slow start up on sites. Underlying operating profit was unchanged at 1.2m (2013: 1.2m). Underlying operating profit consists of operating profit before m amortisation of intangible assets (2013: m) and m non-recurring claim settlement costs (2013: nil). Profit before tax decreased by m to m (2013: m). Taxation was m (2013: m), and the effective tax rate was 34.9% (2013: 31.9%). Basic earnings per share were 0.32p (2013: 1.23p) and diluted earnings per share were 0.30p (2013: 9p). Underlying earnings per share were 1.58p (2013: 1.50p). The results by division are considered below. TClarke - South The South, which is our largest division and includes the group s central operating costs, saw revenue fall by 11.6m to 79.7m (2013: 91.3m), with the start up of schemes in the London market in particular taking longer than we anticipated. The shortfall in volumes in the first half of the year has impacted underlying performance, with the South returning an underlying operating loss of m (2013: nil), before exceptional claim settlement costs of 0.5m. TClarke - North Revenue in the North increased by 3.5m to 20.5m (2013: 17.0m). Operating profit showed a small decrease at m (2013: 0.9m), before adjusting for m amortisation of intangible assets (2013: m). TClarke - Scotland Revenue in Scotland increased by 3.2m to 9.6m (2013: 6.4m), with the division s core strength in the residential market complemented by significant commercial projects. Scotland s operating performance continued to improve, with underlying operating profit improving to m (2013: nil). 7
Financial review Cash flow Our cash balance at 30th June was 0.7m (down from 1.0m at 31st December 2013), with the 5m Revolving Credit facility (RCF) arranged in February 2014 fully drawn down. Our cash position continues to be adversely affected by the prolonged final account negotiations in respect of the project in our Mission Critical division referred to in the Chairman s statement. In addition to the RCF, the group continues to benefit from an 8m overdraft facility which was renewed in February 2014. As the order book grows we are mindful of the need to fund current and future projects and we will continue to monitor and manage our cash and working capital position sensibly. Dividend The interim dividend has been maintained at 0.5p (2013: 1.0p) and will be paid on 10th October 2014 to shareholders on the register at 12th September 2014 as detailed in Note 6. Pension obligations The pension scheme deficit has increased by m in the six months to 30th June 2014 due in the main to a decrease in the discount rate applied to the scheme liabilities. The triennial actuarial valuation of the scheme as at 31st December 2012 showed a deficit of 11.5m and a funding level of 68%. A revised deficit reduction plan has been agreed with the Pension Regulator with the aim of eliminating the deficit by 31st March 2029. The group currently contributes 18% of pensionable salaries to the pension scheme, rising to 20.7% in 2015 and 2016. We continue to meet our ongoing funding obligations to the pension scheme, with employers contributions amounting to 0.5m in the first half of the year (2013: 0.4m). Martin Walton Finance Director 5th August 2014 8
Interim financial statements for the six months to 30th June 2014 Condensed consolidated income statement 6 months to 30 06 2014 6 months to 30 06 2013 Audited 12 months to 31 12 2013 Revenue 109.8 114.7 217.1 Cost of sales (98.1) (103.3) (193.7) Gross profit 11.7 11.4 23.4 Other operating income Administrative expenses: Amortisation of intangible assets Non-recurring costs () () Other administrative expenses (10.5) (1) (20.3) Total administrative expenses (11.2) (10.3) (21.2) Profit from operations 0.5 2.3 Finance costs () Profit before taxation 1.7 Taxation () () Profit for the period Earnings per share Attributable to equity holders of TClarke plc: Basic 0.32p 1.23p 2.51p Diluted 0.30p 9p 2.43p Condensed consolidated statement of comprehensive income Profit for the period 0.5 Other comprehensive (expense) / income: Items that will not be reclassified to profit or loss Actuarial (loss) / gain on defined benefit pension scheme () 0.7 Other comprehensive (expense) / income for the period, net of tax () 0.7 Total comprehensive (expense) / income for the period (0.5) 1.8 9
Interim financial statements for the six months to 30th June 2014 Condensed consolidated statement of financial position 30 06 2014 30 06 2013 Audited 31 12 2013 Non-current assets Intangible assets 23.3 23.6 23.4 Property, plant and equipment 5.3 5.8 5.7 Deferred taxation 1.9 2.0 1.8 30.5 31.4 30.9 Current assets Inventories 0.4 0.5 0.4 Amounts due from customers under construction contracts 27.3 21.2 25.2 Trade and other receivables 37.5 32.2 31.0 Current tax receivables 0.3 Cash and cash equivalents 0.7 7.8 1.0 65.9 62.0 57.6 Total assets 96.4 93.4 88.5 Current liabilities Borrowings (5.0) Amounts due to customers under construction contracts (2.7) (3.1) (2.3) Trade and other payables (53.2) (54.7) (50.4) Current tax liabilities (0.5) Obligations under finance leases (61.4) (57.9) (52.9) Net current assets 4.5 4.7 Non-current liabilities Retirement benefit obligation (11.7) (1) (10.9) Total liabilities (73.1) (69.0) (63.8) Net assets 23.3 24.4 24.7 Equity attributable to owners of the parent Share capital Share premium 3.1 3.1 3.1 Revaluation reserve Retained earnings 15.3 16.4 16.7 Total equity 23.3 24.4 24.7 10
Interim financial statements for the six months to 30th June 2014 Condensed consolidated statement of cash flows 6 months to 30 06 2014 6 months to 30 06 2013 Audited 12 months to 31 12 2013 Net cash (used in) / generated by operating activities (see Note 7) (4.6) 3.3 (2.6) Investing activities Purchase of property, plant and equipment () (0.4) Receipts on disposal of property, plant and equipment 0.5 Net cash outflow on acquisitions of subsidiaries (0.4) Net cash generated by / (used in) investing activities () (0.7) Financing activities Borrowings 5.0 Equity dividends paid (0.9) () (1.2) Repayments of obligations under finance leases Net cash generated by / (used in) financing activities (0.9) (1.3) Net (decrease) / increase in cash and cash equivalents 2.2 (4.6) Cash and cash equivalents at beginning of period 1.0 5.6 5.6 Cash and cash equivalents at end of period (see Note 7) 0.7 7.8 1.0 11
Interim financial statements for the six months to 30th June 2014 Condensed consolidated statement of changes in equity for the six months ended 30th June 2014 At 1st January 2014 Comprehensive income: Profit for period Other comprehensive income: Actuarial loss on retirement benefit obligation Deferred income tax credit on actuarial loss on retirement benefit obligation Total other comprehensive expense Total comprehensive expense Transactions with owners: Dividends paid Total transaction with owners At 30th June 2014 Share capital Share premium 3.1 3.1 Revaluation reserve Retained earnings 16.7 () () (0.5) (0.9) (0.9) 15.3 Total 24.7 () () (0.5) (0.9) (0.9) 23.3 Condensed consolidated statement of changes in equity for the six months ended 30th June 2013 At 1st January 2013 Comprehensive income Profit for period Other comprehensive income: Actuarial gain on retirement benefit obligation Deferred income tax charge on actuarial gain on retirement benefit obligation Total other comprehensive income Total comprehensive income Transactions with owners: Dividends paid Total transactions with owners At 30th June 2013 Share capital Share premium 3.1 3.1 Revaluation reserve Retained earnings 16.1 0.5 () () () 16.4 Total 2 0.5 () () () 24.4 12
Interim financial statements for the six months to 30th June 2014 Condensed consolidated statement of changes in equity for the year ended 31st December 2013 At 1st January 2013 Comprehensive income Profit for period Other comprehensive income: Actuarial gain on retirement benefit obligation Deferred income tax charge on actuarial loss on retirement benefit obligation Effect of change in rate of tax Total other comprehensive income Total comprehensive income Transactions with owners: Dividends paid Total transactions with owners At 31st December 2013 Share capital Share premium 3.1 3.1 Revaluation reserve Retained earnings 16.1 1.2 () 0.7 1.8 (1.2) (1.2) 16.7 Total 2 1.2 () 0.7 1.8 (1.2) (1.2) 24.7 13
Notes to the interim financial statements for the six months to 30th June 2014 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 2013. The figures for the year ended 31st December 2013 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 2013 have been delivered to the Registrar of Companies House and a copy has been made available on the company s website at www.tclarke.co.uk. 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. 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 2013. Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings. 14
Notes to the interim financial statements for the six months to 30th June 2014 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 (which includes the group s central operating costs), 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. 30th June 2014 South North Scotland Property Unallocated & elimination Total Total revenue 79.8 20.5 9.8 11 Inter segment revenue () Revenue from external operations 79.7 20.5 9.6 109.8 Underlying profit from operations 0.9 1.2 Amortisation of intangibles Nonrecurring costs: Exceptional claim settlement costs 1 (0.5) () Profit from operations () 0.5 Finance costs (Loss) / profit before tax (0.9) Taxation expense Profit for the period from continuing operations Assets 65.4 21.8 9.5 (4.4) 96.4 Liabilities (50.0) (10.7) (5.5) (0.9) (6.0) (73.1) Net assets 15.4 1 4.0 3.2 (10.4) 23.3 1A subsidiary company was one of a number of parties that were subject to a substantial damages claim in respect of work carried out in 2007 before it was acquired by the group. Damages were awarded against the company, which were settled by the company's insurers. However, following an unsuccessful appeal the apportionment of costs exceeded the insurance cover in place. The subsidiary company has entered into dialogue with the other party in order to negotiate a full and final settlement. We have received legal advice that the award notification may not, of itself, cause a breach of the group's obligations under its banking facilities. Whilst this legal view has not been confirmed with our bankers, they have provided us with an indication that they remain supportive and have no current intention to withdraw facilities as a consequence of the award. 15
Notes to the interim financial statements for the six months to 30th June 2014 Note 3 Segmental information continued 30th June 2013 South North Scotland Property Unallocated & elimination Total Total revenue 91.3 21.0 6.5 118.8 Inter segment revenue (4.0) () Revenue from external operations 91.3 17.0 6.4 114.7 Underlying profit from operations 1.0 1.2 Amortisation of intangibles Profit from operations 0.9 Finance costs (Loss) / profit before tax 0.9 Taxation expense () Profit for the period from continuing operations Assets 65.3 20.9 7.3 4.3 (4.4) 93.4 Liabilities (51.9) (7.3) (4.2) (1.3) (4.3) (69.0) Net assets 13.4 13.6 3.1 3.0 (8.7) 24.4 16
Notes to the interim financial statements for the six months to 30th June 2014 Note 3 Segmental information continued 31st December 2013 South North Scotland Property Unallocated & elimination Total Total revenue 172.6 37.9 13.6 22 Inter segment revenue (0.4) (6.5) (7.0) Revenue from external operations 172.2 31.4 13.5 217.1 Underlying profit from operations 1.0 1.8 3.2 Amortisation of intangibles Non-recurring costs: Exceptional claim settlement costs (0.5) () Profit from operations 0.5 1.5 2.3 Finance income Finance costs (0.7) () (Loss) / profit before tax () 1.6 1.7 Taxation expense () Profit for the year from continuing operations Assets 6 19.0 8.2 4.2 (3.1) 88.5 Liabilities (43.1) (8.9) (4.4) (1.3) (6.1) (63.8) Net assets 17.1 1 3.8 2.9 (9.2) 24.7 Note 4 Taxation expense The effective income tax rate applied for the period is 34.9% (30th June 2013: 31.9%; 31st December 2013: 36.9%). 17
Notes to the interim financial statements for the six months to 30th June 2014 Note 5 Earnings per share A. Basic earnings per share The earnings per share represent the profit for the period divided by the weighted average number of ordinary shares in issue. Profit attributable to equity holders of the parent Weighted average number of ordinary shares (000s) 30 06 2014 41,402 30 06 2013 41,402 Audited 31 12 2013 41,402 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 19 of the 2013 annual report and financial statements. 30 06 2014 30 06 2013 Audited 31 12 2013 Profit attributable to equity holders of the parent Weighted average number of ordinary shares in issue (000s) 41,402 41,402 41,402 Adjustments: Savings Related Share Option Schemes (000s) 899 594 535 Equity Incentive Plan Conditional share awards (000s) 810 963 833 Options (000s) 112 41 Weighted average number of ordinary shares for diluted earnings per share (000s) 43,223 42,959 42,811 18
Notes to the interim financial statements for the six months to 30th June 2014 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 amortisation of intangible assets and non-recurring costs (being exceptional claim settlement costs), and the tax effects of these items, divided by the weighted average number of ordinary shares in issue. Underlying earnings is the basis on which the performance of the operating divisions is measured. The underlying profit for the period is calculated as follows: Profit from continuing operations attributable to owners of the company Adjustments: Amortisation of intangible assets Exceptional claim settlement costs Tax effect of adjustments Underlying profit after tax from continuing operations 30 06 2014 0.7 30 06 2013 Audited 31 12 2013 0.3 () 1.8 Weighted average number of ordinary shares in issue (000s) 41,402 41,402 41,402 Savings Related Share Option Schemes (000s) 899 594 535 Equity Incentive Plan: Conditional share awards (000s) 810 963 833 Options (000s) 112 41 Weighted average number of ordinary shares for diluted earnings per share (000s) 43,223 42,959 42,811 Underlying earnings per share 1.58p 1.50p 4p Diluted underlying earnings per share 1.52p 1.44p 4.32p 19
Notes to the interim financial statements for the six months to 30th June 2014 Note 6 Interim dividend An interim dividend of 0.5p per share (2013: 1.0p) was approved by the board on 4th August 2014 and has not been included as a liability as at 30th June 2014. The shares will go ex-dividend on 10th September 2014 and the dividend will be paid on 10th October to shareholders on the register as at 12th September 2014. 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 2014 interim dividend, may do so by contacting Capita Registrars on 0871 664 0300. The last day for election for the interim dividend reinvestment is 15th September 2014 and any requests should be made in good time ahead of that date. Dividends paid in period 30 06 2014 30 06 2013 Audited 31 12 2013 Final dividends in respect of previous year 0.9 Interim dividend in respect of the current year 0.4 Dividends recognised in the period 0.9 1.2 20
Notes to the interim financial statements for the six months to 30th June 2014 Note 7 Notes to the consolidated statement of cash flows A Reconciliation of operating profit to net cash from operating activities 30 06 2014 30 06 2013 Audited 31 12 2013 Profit from continuing operations 0.5 2.3 Depreciation charges 0.3 0.3 Equity settled share based payment expense Amortisation of intangible assets 0.3 Defined benefit pension scheme credit Profit on sale of fixed assets Operating cash flows before movements in working capital 1.2 2.9 (Increase) / decrease in inventories (Increase) / decrease in contract balances (1.7) (8.3) (13.1) (Increase) / decrease in debtors (6.5) 3.8 5.0 Increase in creditors 2.8 7.5 3.6 Cash (used in) / generated by operations (4.8) (1.7) Corporation tax paid 0.3 () () Interest paid Net cash (used in) / generated by operating activities (4.6) 3.3 (2.6) B. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments that are readily convertible into cash, less bank overdrafts. C. Borrowings In February 2014 the group arranged a 5m committed three year Revolving Credit Facility and renewed its 8m overdraft facility. The RCF was fully drawn at 30th June 2014. 21
Notes to the interim financial statements for the six months to 30th June 2014 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: 30 06 2014 30 06 2013 Audited 31 12 2013 Present value of defined benefit obligations 39.0 36.9 37.8 Fair value of scheme assets (27.3) (25.8) (26.9) Deficit in scheme recognised in the statement of financial position 11.7 1 10.9 Key assumptions used: Rate of increase in salaries 3.45% 3.90% 4.05% Rate of increase of pensions in payment 3.15% 3.10% 3.20% Discount rate 4.45% 4.90% 4.65% Inflation assumption 3.45% 3.40% 3.55% The mortality assumptions (years): 30 06 2014 30 06 2013 Audited 31 12 2013 Life expectancy at age 65 for current pensioners - Men 23.7 23.6 23.6 - Women 25.0 24.9 24.8 Life expectancy at age 65 for future pensioners (current age 45) - Men 24.9 24.8 24.9 - Women 26.4 26.4 26.4 22
Notes to the interim financial statements for the six months to 30th June 2014 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 22 to the group s financial statements for the year ended 31st December 2013. There have been no material changes in these relationships in the six months ended 30th June 2014 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 24 and 25 of the group s annual report and financial statements for the year ended 31st December 2013. Details of further potential risks and uncertainties arising for the six months ended 30th June 2014 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 2014, in addition to the settlement of the matters arising from the damages claim referred to in Note 3 above, remain market conditions, operational risk, cost inflation, people, health and safety, credit and liquidity risk, cash flow 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 D Henderson Chairman M Lawrence Chief Executive M R Walton Finance Director 5th August 2014 23
TClarke plc 45 Moorfields London EC2Y 9AE 020 7997 7400 www.tclarke.co.uk