T CLARKE CONFIDENT AS PRE-TAX PROFIT RISES 39%

T. Clarke plc, the electrical engineering and contracting company, has announced its interim results for the six months to 30 June 2008.

• Group revenue up 13% to £109m (2007: 96.5m)

• Pre-tax profits up 39% to £5.4m (2007: £3.9m)

• Earnings per share up 45.5% to 9.53p (2007: 6.55p)

• Group order book at £230m (2007: £205m)

• Net cash up £10m from year end

• Strong improvement in regional profits

• London business robust

• Interim dividend up 8.97% to 4.25p

Major completions include:

201 Bishopsgate and Broadgate Tower, London; Associated Press - The Interchange, Camden Lock; Golden Jubilee National Hospital, Glasgow; St. Brendan's College, Bristol; ATS Kilmarnock; Pavillion Building, Wadebridge Showground and Lindholme Prison.

Current projects include:

Westfield, White City, London; Ropemaker, London; Regents Place, London; DLR 3-car upgrade, London; BP2 Canary Wharf; CSA HQ Falkirk; Cambridge Regional College; Excelsior Academy, Newcastle; KIA Manston Airport.

Major projects won include:

NO204 office development Greenwich; One New Change, St Paul's; Deutsche Bank, London; The Fusion Housing Development, Edinburgh; 3 Waitrose Stores; MOD Tidworth Garrison; Trewarthenick House Estate, Cornwall and Harrogate Library.

Pat Stanborough, Chief Executive commented:

"  This has been a period of significant progress for the Group. Despite the current backdrop of uncertainty in the financial markets, all our core operations are performing well. Our plan to diversify the business away from a dependence on the commercial property development sector has gone well and we have a steady flow of work across all the regions we operate in."

" Our forward order book is in excellent shape with a strong mix of work due for completion both in the current year and beyond. We have the skills and the reputation to continue to deliver value for our shareholders." 

" Looking forward, the future for the Group remains solid. We have a first class team and we are regarded as one of the best operators in the sector. We have increased the dividend by 9% and our cash balance remains strong at £19.3m. We remain vigilant to the challenges we face, but we approach the future with confidence and enthusiasm."  

-ends-

Date: 29th August 2008

For further information contact:

Chairman's Statement 

Against the current economic background, I am pleased to report that the Group has performed in line with management expectations in the first six months of the year. Revenue and pre-tax profits have grown by 13% and 39% respectively, reflecting greater activity and improved margins. At the same time we have generated net cash of over £10m from operations during the period and we retain a healthy cash balance as we move into the second half.

The core London business remains robust, whilst there has been a strong improvement in the contribution made across our regional businesses.  

The Group is in excellent shape to meet the challenges ahead. We have a good mix of long term and more immediate business, across the UK. Our outlook for the full year therefore remains unchanged. In light of these encouraging figures and prospects, the Board is proposing that the interim dividend be increased by 8.97 % to 4.25p per share.

At the end of July, Len Arnold retired from the Board having served for ten years as a non executive director, latterly as the senior independent director. Len brought considerable industry knowledge to the Board, and we have benefited tremendously from his contribution during a period which has seen a major expansion in the business of your company. We wish him well in his retirement. 

The Board has begun the process of interviewing potential candidates for the position of non executive director, and expects to make an appointment towards the year end.

Russell Race

Chairman

28th August 2008     

Business Review

Operations review

Our core operations in London and the South East are operating at around 90% capacity and we are expecting to report a turnover of £100m from this division for the year. We remain confident that the business will continue to grow with a lesser dependence on the commercial property development sector. We have, in recent times, taken steps to increase our capacity in anticipation of increases in our workload; we are continuing our apprentice intake and have 100 apprentices in various stages of training. The core operations are in excellent shape and we are well positioned to meet the challenging demands of the current market and the run-up to the 2012 London Olympics. 

Revenue from our core operations increased 11% in the six months and operating margin was 5.0% (2007: 5.6% which included more contract completions). The forward order book is £135m of which £55m is scheduled for completion this year. 

Overall, our regional businesses are performing well with particularly strong results from Derby, Leeds, Newcastle and Scotland. Prior year legacy issues have now been eliminated and we have seen a substantial improvement in margins and expect a continuing improvement going forward. Although some of our regional businesses are experiencing a slight slowdown in residential and small commercial developments, others are experiencing increased demand in retail, public sector and educational facilities.

Regional revenue for the six months was up 15% and operating margin was 4.2%. The forward order book is £95m of which £50m is scheduled for completion this year. 

Completions

201 Bishopsgate and Broadgate Tower, London; Data Centre, London; Associated Press - The Interchange, Camden Lock; Golden Jubilee National Hospital, Glasgow; MLD School & Sports Hall, Edinburgh; Equine Hospital, Newmarket; Bluecoats Arts Centre, Liverpool; Victoria Building, Liverpool University; Grand Arcade, Cambridge; Heycock Theatre, Cambridge; Framwellgate Hotel, Durham; Medway Council Offices; St. Brendan's College, Bristol; ATS Kilmarnock; Shires Shopping Centre, Leicester, Ward K2 Addenbrookes Hospital, Cambridge; Pavillion Building, Wadebridge Showground and Lindholme Prison.

Current projects

Westfield, White City, London; Ropemaker, London; Regents Place, London; DLR 3-car upgrade, London; Central St. Giles, London; BP2 Canary Wharf; CSA HQ Falkirk; West Lothian High School; Searles Leisure Complex, Heacham; Maine Road Primary School, Manchester; Cambridge Regional College; Excelsior Academy, Newcastle; KIA Manston Airport; Gloucester Quays; East Chester Hospice; Wilton Plaza, London; South Ilford Primary Health Care Centre; Callington Community College Renaissance Building, Cornwall and Leeds Grand Theatre.

New work secured

NO204 office development Greenwich; One New Change, St Paul's; Deutsche Bank, London; The Fusion Housing Development, Edinburgh; Carstairs Mental Hospital, Lanarkshire; Mount Carmel High School; 3 Waitrose Stores; Northumbria University Sports Facility; Chatham Dockyard Boat Museum; Medway Hospital Substation; MOD Tidworth Garrison; ATS Galashiels; Nottingham High School; Stantonbury Campus, Milton Keynes; Trewarthenick House Estate, Cornwall and Harrogate Library.

Outlook

Our strategy has been to diversify our activities by market sector and geographic location. Despite the economic uncertainty in some sectors such as commercial property development and residential, we have some exciting opportunities ahead of us and remain confident that the group will continue to achieve optimum revenues and margins. 

We are preferred bidder for a number of major projects with a value of circa £100m. The group's forward order book is £230m (2007: £205m), of which £105m is scheduled for completion this year. Our cash balances are robust and we are well positioned for the future.

Financial Review        

Group revenue and operating profit

Revenue for the six months to 30 June 2008 increased £12.8m (13.3%) to £109.3m (2007: £96.5m). 

Gross profit increased £2.3m (16.7%) to £16.6m (2007: £14.3m) reflecting a significant improvement in the results from the regional companies which was partially offset by a £1.1m (10.7%) increase in administrative expenses to £11.5m due to salary increases, new accounting system costs and bad debt expense.

Operating profit increased £1.3m (32.6%) to £5.2m (2007: £3.9m).

Profit before taxation

Profit before taxation increased by £1.5m (39.2%) to £5.4m (2007: £3.9m) after a £0.22m increase in investment income from interest received on cash deposits held.

Taxation increased by £0.3m to £1.6m for the six months to 30 June 2008. The effective tax rate reduced from 33% to 30%.

Profit after tax and earnings per share

Profit after tax increased by £1.2m (45.5%) to £3.8m for the six months to 30 June 2008. 

Correspondingly, earnings per share increased by 2.98p to 9.53p (2007: 6.55p).

Cash flow and dividend

Net cash from operating activities increased by £10.7m to £13.7m for the six month period ended 30 June 2008 compared to the six month period ended 30 June 2007 mainly due to an £1.3m increase in operating profit and a £9.3m net increase in working capital movements. 

Net cash (including bank overdrafts) was £19.3m as at 30 June 2008, compared to £9m as at 31 December 2007. Included within £19.3m net cash was £22.7m of cash and short-term deposits and £3.4m of overdrafts held at the period end.

The interim dividend increased by 0.35p (8.97%) from 3.9p to 4.25p reflecting the improved performance in the business. The dividend will be paid on 10 October 2008 as detailed in Note 6.

Core operations

Revenue increased in London by £4.4m (10.9%) to £45.2m. Operating profit was broadly static at £2.3m and operating profit margin reduced from 5.6% to 5.0% reflecting the higher level of completions in the prior period to 30 June 2007, compared with ongoing construction activities in the current period.

Profit before tax increased slightly to £2.4m (2007: £2.2m) due to interest received resulting in a profit before tax margin of 5.4% (2007: 5.5%).

Regional operations

Revenue from regional operations increased by £8.4m (15.1%) to £64.1m.

Regional operating profit increased by £1.3m (92.7%) to £2.7m and operating profit margin increased from 2.5% to 4.2% as a result of improved profitability in a number of regional companies where legacy issues impacted prior year results. Regional profit before tax increased by £1.4m (97.4%) to £2.8m.

Pension obligations

The pension scheme deficit on the balance sheet has remained broadly static at £2.3m from £2.4m at the year end. The reduction in the pension scheme liabilities, due to the 0.9% increase in the discount rate (reflecting an increase in the yield on AA-rated corporate bonds from 5.8% to 6.7%) was offset by an increase in life expectancy assumptions of approximately two years and an increase in the inflation rate assumption of 0.8% to 4.2%. If the yield on AA-rated corporate bonds were to decrease in the future, the effect would be to increase the pension scheme deficit with the loss being recognised through reserves on the balance sheet. 

The company is currently conducting a review of its defined benefit pension scheme arrangements.

Pat Stanborough                   Victoria French

Chief Executive                        Finance Director

28th August 2008                     28th August 2008