INVESTOR PACK INTERIM RESULTS FOR THE 6 MONTHS ENDING 30TH JUNE 2018 INVESTOR PACK Introduction to your presenters
Mark Lawrence Group Chief Executive Officer Appointed to Board, 2nd May 2003 | Age 50
Mark has had 31 years with the company and started his career here by completing an electrical apprenticeship in 1987. He progressed through the company, becoming Technical Director in 1997, Executive Director in 2003 and Managing Director, London Operations in 2007. As Group Chief Executive Officer since January 2010, Mark has led strategic changes across the group and remains a hands-on leader, taking personal accountability and pride in Clarke's performance and, ultimately our shareholders’ and clients’ satisfaction. He regularly walks project sites and gets involved personally with many of our clients, contractors and our supply chain.
Trevor Mitchell Group Finance Director Appointed to the Board on 1st February 2018 | Age 58
Trevor is a Chartered Accountant and accomplished finance professional with extensive experience across many sectors, including financial services, construction and maintenance, education and retail, working with organisations such as Balfour Beatty plc, Kier Group plc, Rok plc, Clerical Medical Group and Halifax plc. Prior to his appointment, Trevor had been working with TClarke since October 2016, assisting with simplifying the structure and improving the Group’s financial controls and procedures.
2 INVESTOR PACK
M&E Contracting Every Picture tells a TClarke Story Secured Battersea Power Station Phase 2 Electrical Basement Package Value: £18m
Current Bid Office Electrical Shell & Core Package
Technologies
Secured Battersea Power Station Phase 2 BMS Basement Package Value £4.0m
Current Bid Office BMS Shell & Core Package
Residential
Current Bid Phase 3 Electrical Residential Shell & Core
Technologies Phase 2 Apple HQ Current Bid Phase 3 Phase 3 BMS Residential Shell & Core
3 Strategy INVESTOR PACK
Our Five Target Markets
Infrastructure > Rail > Prisons > Airports > Healthcare > Hospitals > Defence > Education
Residential & Accommodation > New build > Refurbishment > Hotels > Student Accommodation
Facilities Management & Frameworks > Planned and Reactive Maintenance > On Site Facilities Management > Long Term Frameworks > Term Contracts
Technologies > Data Centres > IT Infrastructure and Networks > Audio Visual > Fire and Security > Smart Buildings > Manufacturing and Prefabrication
M&E Contracting > Commercial Offices > Retail > Leisure and Stadiums > Museums and Galleries > Design and Build
5 INVESTOR PACK Our Target Sectors
2017: £311m . 2017 Investments in technologies funded from internal resources creating substantial new 2018 H1: £153.5m capabilities Forward Order Book: £370m . Strong core of M&E and Residential work with order book visibility
£173m £165m
£79m £78m £78m
£60m £55m
£33m £25m £16m £14m £12m £12m £10m £12.5m
Infrastructure Residential/Accommodation FM & Frameworks Technologies M&E Contracting
H1 2018 FY 2017 FOB 6 INVESTOR PACK
Financial Review Financial Highlights
Change H1 2018 Margin H1 2017 Margin
Revenue from continuing operations +7% £153.5m £142.8m
Operating profit - underlying1 +38% £4.0m 2.60% £2.9m 2.00%
Operating profit - reported1 +83% £4.4m £2.4m
Profit before tax - underlying 1 +48% £3.7m 2.40% £2.5m 1.75%
Profit before tax - reported +105% £4.1m £2.0m
Earnings per share - underlying 2 +47% 7.06p 4.8p
Earnings per share - diluted +47% 6.91p 4.71p
Earnings per share - basic +101% 7.83p 3.89p
Interim dividend +10% 0.66p 0.6p
Net cash +96% £4.7m £2.4m
Order book -6% £370m £392m
1. Underlying profit is profit from continuing operations Earnings per Share before 2. amortisation of intangible assets and non-underlying items. Underlying earnings is calculated by dividing 10.00p underlying profit after tax by the weighted average number of shares in issue. 8.00p
6.00p Diluted 4.00p Basic Underlying 2.00p
- H1 2016 H1 2017 H1 2018 8 Income Statement
Revenues H1 2018 H1 2018 (£m) H1 2017 (£m) Revenue Profit Margin Revenue Profit Margin
London and South East 2 92.5 3.7 4.00% 81.1 3.5 4.40%
Central and South West 35.8 0.8 2.20% 23.9 -2.2 -9.30% £11.2m Scotland
North 16.9 0.8 4.70% 27.5 1.1 3.80%
Scotland 11.2 0.3 2.70% 13 0.5 3.90%
Elimination -2.9 -2.7 - £16.9m North group costs -1.6
Total Revenue 153.5 142.8 Underlying operating 4 2.60% 2.9 2.00% profit Net interest -0.3 -0.4
Underlying PBT 3.7 2.5
£92.5m Non-recurring items 0.5 -0.4
£35.8m London & South East Amortisation -0.1 -0.1
Profit before tax 4.1 2.0 Central & South West
9 INVESTOR PACK Cash Flow
H1 2018 (£m) H1 2017 (£m) Operating cash flow before working capital 4.5 3 movements Net Cash Working capital movement -8.3 -7.5
Operating cash flow -3.8 -4.5 £4.7m
Net interest -0.1 -0.1
-1.5 -0.2 Corporation tax £2.4m -0.4 -1.1 Fixed asset additions net of disposals
-5.8 -5.9 £1.3m Cash outflow before financing - - Bank loans -1.2 -1.1 Dividends paid 0.1 H1 2016 H1 2017 H1 2018 Other movements -7 -6.9 Net cash inflow 16.7 12.3 Opening Cash 9.7 5.4 Closing Cash
10 INVESTOR PACK Balance Sheet
H1 2018(£m) H1 2018(£m) H1 2017 (£m) H1 2017 (£m)
Intangible assets 25.8 22.7
Property plant and equipment 4.8 4.8
Non Current Assets 30.6 27.5
Inventories and construction contracts 19.8 23.7
Debtors 59 44.7
Creditors -75.1 -65.1
Working capital excluding cash 3.7 3.3
Net Cash 4.7 2.4
Pension Scheme -18.9 -22.3
Tax - current and deferred 2.3 3.1
Finance lease obligations -0.1 -0.1
Net assets 22.3 13.9
Net current assets 12.5 8.1
11 INVESTOR PACK Investment Case
1 2 3 4 5 6
Cash Management Financial Forward Balanced Improving Discipline & Strength Revenue Business Margin Profile Strong Risk Visibility & Profitability Control Environment
> The Group’s cash > Targeted approach > Substantial and > 100% of 2018 > Increasing exposure > Focus on growing generation remains to contract growing cash target revenues to long-term profits ahead of robust with the year tendering process balances. secured infrastructure work. revenues. end 2017 net cash and assessment and > Planned investment > 50% of revenues > Investing in new > Differentiated improving by 26% strength of potential for future growth for 2019 secured technologies and service offering to £11.7 million, the customers. funded entirely from secular growth commands higher strongest closing > £213 million of > Prudent profit internal resources. revenues booked for markets. margins. balance recorded recognition. since 2009. > Commitment to 2019 and beyond > Five Target Markets > Medium term target progressive dividend – M&E Contracting, to increase the > Half year (June policy. Residential & underlying operating 2018) cash up 96% Accommodation, margin to 3%. > Interim dividend up Year on year from Technologies, FM £2.4m to £4.7m 10% > & Frameworks and Infrastructure.
12 INVESTOR PACK
Investment Case - Journey so far Revenue Operating Profit • Medium term target to increase the underlying operating margin to 3%. Full Year Dec 2017 £311m
Full Year Dec 2017 £7.3m = 2.3%
H1 2018 £4.0m = 2.6%
£193.8m
£2.9m
2012 2013 2014 2015 2016 2017 2018
13 INVESTOR PACK
Operational Review INVESTOR PACK What we do
Our competitive What we do The value we create advantage for our stakeholders
Design Procure Install Maintain People For shareholders We employ highly qualified and The ability to identify and take experienced professional engineering opportunities to grow the business staff and operatives and run an and deliver progressive returns extensive, industry-leading apprenticeship scheme, which provides For customers a source of high-quality new recruits. Total reliability in project delivery, quality and safety alongside high technical skills
Partnerships For employees We focus on building long-term Industry-leading career paths within partnerships nationwide with principal a world-class organisation and project contractors and clients, enabling us to work to take pride in. collaborate on key projects. For partners A collaborative and open approach to We design and value We add value through We employ highly qualified Our in-house teams work which maximises value, efficiency engineer systems, drawing expert procurement of the and experienced in-house provide a suite of Nationwide coverage and productivity We cover the whole of mainland UK on our innovative approach necessary materials, engineering teams of specialist mechanical, with 17 offices organised in four and technological expertise services and expertise professionals and operatives electrical and ICT For society regional operations that mirror our to provide intelligent across the life of a project. to install and deliver our maintenance services to The high-quality built environment, clients’ organisation and serve their building solutions. solutions and services. support the ongoing high-quality engineering jobs and needs effectively. functioning of a building highly responsible approaches we all throughout its lifecycle, want across the UK. Technology We are a high-technology business and leaders in the delivery of complex How we do it Delivers value for all our stakeholders installations and new technologies. We are investing to ensure we remain at The TClarke Way the forefront of technological advances. 1 2 3 4 5 6
Safety Quality Innovation Value People Relationships Reputation Safety is our High-quality Expert in Delivering against Directly Taking As a market leader, we have built a number one work that’s right buildability and innovative end- employed, high- responsibility at reputation for delivery and quality. daily priority first time integrated user focused quality building every level for thinking contracts services personnel collaboration
15 INVESTOR PACK From Tender to Contract Award
Typical Tender Period
Week Week Week Week Week Week 1 2 3 4 5 6
Week Tender Received Measure Quantities Mid Bid Interview Obtain Supplier Prepare Bid Return Analyse tender, apply 7 Quotations Documentation labour rates, fixed price, profit and identify risk items
Week Week Week Week Week 12 11 10 9 8
Deliver Tender Return
Post Bid Presentation Contract Formally Post Bid Questions Awarded & Addendums Tender analysed by clients team
Pre Construction period
Week Week Week Week Week 13 14 15 16 17
Mobilise Project Team Place key equipment on order to lock in price
16 INVESTOR PACK
Sector 1: Infrastructure Infrastructure > Rail > Prisons > Airports > Healthcare > Hospitals > Defence > Education
£79m £78m
£25m Stanmore Hospital
Infrastructure
H1 2018 FY 2017 FOB Paddington Bakerloo Line Link
. Powerful, nationwide capabilities and reputation. . Full range of specialist accreditations for airside, The STEM Centre, University of Essex underground and defence work. . Strong order book visibility and client and end user relationships. . Excellent streams of long term project work
17 Cambridge Judge Business School Bank Station Capacity Upgrade INVESTOR PACK
Sector 2: Residential & Accommodation Residential & Accommodation > New build > Refurbishment > Hotels > Student Accommodation
£60m
£33m
The Minories Hotel, London £16m
Residential/Accommodation
H1 2018 FY 2017 FOB
Beaufort Park, Hendon
. Strong and longstanding Bodmin Jail, Hotel relationships with house builders and developers. . Complete, integrated skillsets and innovative practices to deliver productivity and safety leadership onsite. . Innovation to deliver smart and ultra low energy homes and accommodation.
One Bishopsgate Plaza Heritage Grange, Edinburgh 18 INVESTOR PACK Sector 3: FM & Frameworks Facilities Management & Frameworks > Planned and Reactive Maintenance > On Site Facilities Management > Long Term Frameworks > Term Contracts
Procure 22 Framework & Designed for Life Framework: Building for Wales £12m £12m £10m
FM & Frameworks Springfield Nuclear Fuels H1 2018 FY 2017 FOB
. Highly skilled specialist FM teams Manchester Airport Group across the UK serving advanced industrial, specialist building services and energy sectors . Longstanding relationships and frameworks in education and defence . Healthcare P22 Frameworks and agreements with Siemens, GE and Phillips . UK network systems and directly employed teams to deliver nationwide contracts.
EDF Nuclear Energy Defence Estates 19 INVESTOR PACK
Sector 4: Technologies Technologies > Data Centres > IT Infrastructure and Networks > Audio Visual > Fire and Security > Smart Buildings > Manufacturing and Prefabrication
Stansted Manufacturing Facility £55m
£12.5m £14m
Technologies H1 2018 FY 2017 FOB
Interxion London 3 Data Centre
22 Bishopsgate Data / BMS / Fire & Security . Substantial growth opportunities . Market leading in-house propositions and technology leadership . Project work on most advanced developments in the market
20 London Wall Place – fire alarm Eton Associates - new work streams INVESTOR PACK Sector 5: M&E Contracting M&E Contracting > Commercial Offices > Retail > Leisure and Stadiums > Museums and Galleries > Design and Build
£173m £165m
£78m
S9, International Quarter London M&E Contracting H1 2018 FY 2017 FOB . Sustained reputation as UK market leader for scale, experience and innovation. . Success in growing our mechanical offering to match electrical. . Continued success winning most complex, challenging and rewarding projects in the South Bank Place market 1 Triton Square, London Aerohub Business Park, Newquay . Strong order book visibility and client and end user relationships 21 INVESTOR PACK Future Opportunities London
Westfield, Croydon
One Leadenhall
Google, KGX1 150 Leadenhall Waterloo Station, Retail Development
22 INVESTOR PACK Future Opportunities UK
Manchester - St. John district Manchester - Media City Phase Liverpool – HMRC Framework, India Building
Sheffield – Fitzwilliam Street Cambridge – Melbourne Science Park Leeds – McLaren Showroom 864 bed Student Accommodation
23 INVESTOR PACK Future Opportunities UK
Bath – Rugby Stadium
Cardiff – Velindre Cancer Centre Falkirk – Forth Valley College
Exeter – Exeter Science Park, Phase 3 Plymouth – Sugar Quay 24 INVESTOR PACK Summary & Outlook
Strong start to the year planned revenues are secured for 2018. Central and South West has returned to profitability and our core London & South East operation remains strong.
. Delivering against our strategic plan for medium term margins of 3%, underlying operating margin increased to 2.6% from 2.0% . All regions profitable in the first half of 2018 . 7% increase in revenues to £153.5 million . Year on year net cash improved from £2.4 million to £4.7 million . 10% increase in interim dividend to 0.66p per share (30th June 2017: 0.6p per share) . £370 million forward order book (30th June 2017: £392 million) . Bank Credit approved terms in place for extension of banking facilities to August 2022
Revenues and profits for 2018 to be in line with current market expectations.
. Revenues of £300 million, underlying operating profit £7.8 million . Underlying profit after interest but before tax of £7.0 million . Underlying EPS of 13.2p
For 2019, 50% of our planned revenues secured
Market reputation for operational excellence and successful delivery of the most complex assignments underpins our optimism for the future.
25 At a Glance p27 Safety Leadership p28 Appendices TClarke Academy p29 Board of Directors p30 INVESTOR PACK At a Glance
Our five target markets Our clients and end users
TClarke has deep, long-term partnerships both with major principal contractors and with property owners Infrastructure and developers. Below is a selection of top clients based on current revenue spend. > Rail > Prisons > Airports > Healthcare > Hospitals > Defence > Education
Residential & Accommodation > New build > Refurbishment > Hotels > Student Accommodation
Facilities Management & Frameworks > Planned and Reactive Maintenance > On Site Facilities Management > Long Term Frameworks > Term Contracts
Technologies What we do > Data Centres > IT Infrastructure and Networks > Audio Visual Through the full building lifecycle New standard of building intelligence Bringing the building to life > Fire and Security > Smart Buildings Design Install Access Security access Power Alarm and Design systems In-house teams to services Manage my Distributed and security > Manufacturing and Prefabrication and value install the building and my data security access. controlled. Alarm, security and engineer them. services on projects My computer, safety systems M&E Contracting of every scale across my data, my locker, integrated and the UK. Facial/retina Services controlled. > Commercial Offices my services. Heating, lighting, recognition ventilation, water, > Retail Produce Recognise me. waste and their Systems and > Leisure and Stadiums Add value and Maintain Find my team networks and internet increase buildability In-house teams to controls. Integration of > Museums and Galleries through expert Location management systems provide maintenance Identify my team’s > Design and Build procurement. services across the Data and IP addressable location and my components and the UK. Highly resilient place, too. and secure data delivery of data and networks. control within advanced graphic user interfaces.
27 Safety Leadership
. High quality large scale nationwide safety team, London team pictured
. Investment in ongoing campaigns to raise awareness, refresh standards and avoid complacency
. Innovative approaches including industry’s first dedicated safety and environmental risk reporting app
. Focus on increasing culture of reporting showing success in 2017 with an increase of 21.5% in risk reporting
. Continued ‘Absolute’ Accident Reporting regime
. Accidents down 17% in 2017
. Our people won main contractor safety awards across the UK during the year
28 INVESTOR PACK
TClarke Academy
. Leading the industry in career path training for all
. Reflects the unique bond between TClarke people and the company
. Clear routes ahead giving everyone a real chance to progress
. Work placement modules embed the ‘TClarke Way’ of doing each job
. Starting a business wide system of mentoring
. 2017 programme of ‘masterclass’ modules is led by our senior team
. Academy driven and led personally by our own senior people
. 52 New apprentices across the Group from September 208
29 Board of Directors
Mark Lawrence Iain McCusker Group Chief Executive Officer Chairman Appointed to Board, 2nd May 2003 Appointed to Board, 1st Jan 2009 Age 50 Age 67
Mike Robson Mike Crowder Senior Independent Non-Executive Group Managing Director Appointed to Board, 1st Jan 2007 Director Age 54 Appointed to Board, 18th Nov 2015 Age 57
Trevor Mitchell Peter Maskell Group Finance Director Independent Non-Executive Director Appointed to the Board on 1st February 2018 Appointed to the Board on 1st January 2018 Age 58 Age 59
30