RNS Number : 7038F
TClarke PLC
20 July 2021
TClarke plc
Half year results for the six months ended 30 June 2021
TClarke on track for full year; record order book of more than £500m
TClarke plc ("the Group" or "TClarke"), the Building Services Group, announces its half year results for the period ended 30 June 2021.
Business Highlights:
· Record £503m order book, with the order growth primarily in the Technology sector where recent investment over prior periods is starting to be rewarded
· Three Data Centre projects won successfully with more being tendered
· Significant progress in building capability as the Company progresses towards target of delivering £500m in revenues whilst maintaining margins
· Proprietary Smart Building solution gaining traction in both commercial market and other growth areas given the increasing focus on 'net zero carbon'
· Additional order book potential upside from significant opportunities in bidding stage
· Interim dividend maintained at 0.75p
· Well set for increased volumes and margin growth in the second half of the year
Financial Highlights:
2021
2020
Revenue
£138.2m
£106.1m
Operating profit - underlying1
£2.4m
£2.2m
Operating profit - reported
£2.4m
(£1.0m)
Operating margin- underlying1
1.7%
2.1%
Profit before tax - underlying1
£1.9m
£1.7m
Profit before tax - reported
£1.9m
(£1.5m)
Net cash
£2.0m
£7.5m
Earnings per share - underlying2
3.58p
3.10p
Earnings per share - basic
3.58p
(2.85p)
Interim dividend per share
0.75p
0.75p
Forward order book
£503m
£402m
1 Underlying operating profit, profit before tax and operating margin are stated before amortisation of intangible assets and restructuring costs.
2 Underlying earnings per share is calculated by dividing underlying profit after tax by the weighted average number of shares in issue
Trading
The business has reached a significant strategic milestone with our forward order book in excess of £500m for the first time as we deliver our growth strategy. The investment that we have made in our people to support the tendering process and project delivery has started to be reflected both in the record order book and also in preparation for the London business to deliver very significant growth in volumes in the second half of 2021.
As previously reported, turnover and profit in 2021 will be heavily weighted to the second half of the year. This is particularly significant in the London business where two thirds of secured turnover and over 80% of profit is forecast to be delivered in the last six months of the year. London's operating margin for the first six months was 1.4% (2020 3.2%), UK South operating margin was 3.7% (2020 3.1%) and UK North operating margin was 3.7% (2020 (1.1%)). After deducting group costs of £1m the overall Group operating margin during the period was 1.7% (2020 2.1%).
Cash
Net cash of £2.0m as at 30 June 2021 is some £5.5m lower than at the same time in 2020. This is mainly the result of the introduction of the construction industry reverse charge VAT scheme from 1 March 2021, with the impact of this change being a once off reduction in cash of £3.5m. The principal cash movements are detailed in the banking facilities section of this report.
Dividend
The Board proposes an interim dividend of 0.75p per share (2020: 0.75p per share) to be paid on 1 October 2021 to shareholders on the register at 3 September 2021.
Order Book
It is pleasing to report that the Group's order book now stands at a new record of £503m. This is a £100m increase compared to the position at 30 June 2020. In addition, TClarke has many significant opportunities in the bid stage and is well placed to secure these opportunities. The growth in order book has not come from deferred projects from 2020 but encouragingly the opportunities have come primarily in the Technology sector where our investment over the last few years is starting to be rewarded.
Three significant Data Centre projects have been secured for completion by the first quarter of 2022, with several others currently being tendered.
Separately, the investment in the Group's proprietary Smart Building solution is gaining traction not only in the commercial market but in growth areas such as the healthcare sector where there is an increasingly important 'net zero carbon' agenda.
The split of the order book is as follows:
Market sector
30 June 2021
30 June 2020
% Increase over 2020
Infrastructure
£93m
£85m
9%
Technology
£132m
£49m
169%
Residential & Hotels
£113m
£112m
1%
Engineering Services
£153m
£139m
10%
Facilities Management
£12m
£17m
(29%)
Total
£503m
£402m
25%
Outlook
TClarke has made excellent progress in building its capability and order book as we rapidly progress to reach our target to deliver £500m in revenues whilst maintaining our margins. The Board expects revenues and profit to build quickly throughout the course of the second half of 2021 and remains confident of meeting market expectations for the full year.
Mark Lawrence, Chief Executive, commented
"We are immensely proud of the teams here at TClarke that have worked hard to secure our largest ever order book which now stands at £503 million. In March of this year, I stated that we expected revenues and profit to build rapidly throughout the course of the second half of the year as our recently secured projects gain momentum. We have an excellent balance of projects across a wide range of growing sectors and our reputation for delivering high quality work remains a key strength of our business. With the current project programmes we believe that the second half of 2021 will be the busiest in our history."
-ends-
Date: 20 July 2021
For further information contact:
TClarke plc
Mark Lawrence
Chief Executive Officer Trevor Mitchell Finance Director
Tel: 020 7997 7400
www.tclarke.co.uk
Cenkos Securities plc (Corporate Broker)
Ben Jeynes (Corporate Finance)
Alex Potten (Sales)
Tel: 020 7397 8900
www.cenkos.com RMS Partners Simon Courtenay Tel: 020 3735 6551
Operational Review
The Group is managed in three operational areas, London, UK South and UK North, providing nationwide coverage from nineteen locations across the UK.
We focus on repeat customers and framework contracts in the following key markets:
· Infrastructure
· Residential & Hotels
· Facilities Management
· Engineering Services
· Technologies
TClarke - London
30 06 2021 £m
30 06 2020 £m
Revenue
72.8
58.7
Underlying operating profit
1.0
2.0
Underlying operating profit margin
1.4%
3.2%
Order book
346
252
London is the most significant of our three operating divisions and includes our combined engineering services London business, our London technology business and our off-site prefabrication facility at Stansted.
We have continued to make good progress on our key projects within our Engineering Services offering, and the first half of the current year has seen a particularly strong performance across our medical controls panel manufacturing projects. London is engaged on a number of high profile commercial and hotel developments all of which offer future fit out opportunities. We have started work on the first of our large data centre project wins, and as set out above are well positioned to significantly increase output and profitability in the second half of the year. The London order book has grown by 37% mainly as a result of the Data Centre wins. In addition, there are many opportunities that we are well placed to secure across all our market sectors.
The heavy weighting of turnover to the second half of 2021 combined with investment in people needed to deliver the volume of projects has meant that London operating margin has fallen to 1.4%. Our expectation is for margins to recover during the second half of 2021 back to London's normal operating margin of circa 3.5%.
TClarke - UK South
30 06 2021 £m
30 06 2020 £m
Revenue
35.4
29.1
Underlying operating profit
1.3
0.9
Underlying operating profit margin
3.7%
3.1%
Order book
57
72
UK South operates from our offices at Birmingham, Derby, Kimbolton, Newport, Peterborough, Portishead, Plymouth and St Austell, and is able to target a vast range of construction and facilities management opportunities across the region.
The first half of the year has seen continued success in the healthcare sector, delivering and securing significant projects across the region. The Small Works and Facilities Management teams have also seen a strong performance, including the Climate Solutions and Security divisions. The region has successfully secured two large de-carbonisation schemes to be delivered during 2021.
TClarke - UK North
30 06 2021 £m
30 06 2020 £m
Revenue
30.0
18.3
Underlying operating profit/(loss)
1.1
(0.2)
Underlying operating profit/(loss) margin
3.7%
(1.1%)
Order book
100
78
The UK North division operates from seven locations; Liverpool, Manchester, Leeds, Newcastle, Falkirk, Aberdeen and Dumfries.
An operating profit of £1.1m reflects a strong performance for the first half of the year, driven by completion of our first major engineering services project in Liverpool, our continued success in winning and delivering a number of educational projects through our Leeds office and Scotland's residential work. In addition our Manchester office has recently secured a significant engineering services project for a major financial institution.
Pension Obligations
In accordance with IAS 19 'Employee Benefits', an actuarial gain of £4.4m, net of tax, has been recognised in reserves during the period, with the pension scheme deficit decreasing to £24.5m (30th June 2020: £29.9m). The decrease in the deficit is largely the result of the discount rate increasing to 2.0% (30th June 2020: 1.6%). In accordance with the Group's agreed deficit reduction plan, described in detail in the most recent annual report, the annual deficit reduction contribution is set at £1.5m for the current year, and will remain at this amount until the review of the next triennial actuarial valuation of the scheme at 31 December 2021.
The scheme is closed to new members and the Group continues to meet its ongoing obligations to the scheme.
Banking Facilities and Cash Flow
The Group has a £10m overdraft facility, repayable on demand, and a £15m revolving credit facility ("RCF") expiring on 31st August 2024. At 30 June 2021 the RCF was fully drawn down and the overdraft facility was unutilised. The gross cash balance was £17.0m, resulting in net cash of £2.0m. The Group therefore has up to £27.0m available to support the Group's working capital flows and funding demands during the course of the year. The Group has £40.1m bonding facilities in place of which £25.2m were unutilised at 30 June 2021.
The net cash figure of £2m is £5.5m lower than at the same time in 2020. This is mainly as a result of the introduction of the Construction industry reverse charge VAT scheme from 1 March 2021. The impact of this has been to reduce cash by £3.5m. The principal cash movements are detailed below:
£m
Balance 1 July 2020
7.5
Profit after tax
4.3
Reverse Charge VAT regime
(3.5)
Repayment of deferred VAT
(1.1)
Dividends
(1.9)
Pension deficit reduction
(1.5)
Employee Share Trust Share Purchase
(0.5)
Other
(1.3)
Balance at 30 June 2021
2.0
Net Assets and Capital Structure
The Group is funded by equity capital, retained reserves and bank facilities, and there are no plans to change this. Shareholders' equity is £19.0m; an increase of £3.3m compared to 30 June 2020.
Condensed consolidated income statement
Unaudited
Unaudited
Audited
6 Months to
6 Months to
12 Months to
30 06 2021
30 06 2020
31 12 2020
£m
£m
£m
Revenue
138.2
106.1
231.9
Cost of sales
(123.0)
(90.9)
(199.0)
Gross profit
15.2
15.2
32.9
Administrative expenses:
Amortisation of intangible assets
-
(0.2)
(0.2)
Non-underlying costs
-
(3.0)
(3.7)
Other administrative expenses
(12.8)
(13.0)
(26.9)
Total administrative expenses
(12.8)
(16.2)
(30.8)
Operating profit/(loss)
2.4
(1.0)
2.1
Finance costs
(0.5)
(0.5)
(0.9)
Profit/(loss) before taxation
1.9
(1.5)
1.2
Taxation
(0.4)
0.3
-
Profit/(loss) for the period
1.5
(1.2)
1.2
Earnings per share
Attributable to owners of TClarke plc
Basic
3.58p
(2.85)p
2.87p
Diluted
3.38p
(2.85)p
2.69p
Underlying basic
3.58p
3.10p
10.29p
Condensed consolidated statement of comprehensive income
Unaudited
Unaudited
Audited
6 Months to
6 Months to
12 Months to
30 06 2021
30 06 2020
31 12 2020
£m
£m
£m
Profit/(loss) for the period
1.5
(1.2)
1.2
Other comprehensive income/(expense) Items that will not be reclassified to profit or loss
Actuarial gain on defined benefit pension scheme, net of tax
4.4
(6.0)
(4.8)
Revaluation of minority shareholding equity investment
-
-
(2.0)
Other comprehensive income/(expense) for the period, net of tax
4.4
(6.0)
(6.8)
Total comprehensive income/(expense) for the period
5.9
(7.2)
(5.6)
Condensed consolidated statement of financial position
Unaudited
Unaudited
Audited
30 06 2021
30 06 2020
31 12 2020
£m
£m
£m
Non-current assets
Intangible assets
25.3
25.3
25.3
Property, plant and equipment
7.6
7.9
8.0
Deferred taxation
5.2
5.9
6.2
Trade and other receivables
3.2
-
3.6
Investments
-
2.0
-
Total non-current assets
41.3
41.1
43.1
Current assets
Inventories
0.4
0.3
0.4
Amounts due from customers under construction contracts
56.4
39.6
41.7
Trade and other receivables
37.3
31.3
34.5
Current tax receivables
0.6
-
0.7
Cash and cash equivalents
17.0
22.5
25.2
Total current assets
111.7
93.7
102.5
Total assets
153.0
134.8
145.6
Current liabilities
Borrowings
(15.0)
(15.0)
(15.0)
Amounts due to customers under construction contracts
(1.8)
(1.5)
(1.1)
Trade and other payables
(85.8)
(68.3)
(77.5)
Current tax liabilities
-
-
-
Obligations under leases
(1.2)
(1.5)
(1.3)
Total current liabilities
(103.8)
(86.3)
(94.9)
Net current assets
7.9
7.4
7.6
Non-current liabilities
Obligations under leases
(2.0)
(2.9)
(2.2)
Deferred tax liabilities
(0.2)
-
-
Trade and other payables
(3.5)
-
(2.6)
Retirement benefit obligation
(24.5)
(29.9)
(30.2)
Total non-current liabilities
(30.2)
(32.8)
(35.0)
Total liabilities
(134.0)
(119.1)
(129.9)
Net assets
19.0
15.7
15.7
Equity attributable to owners of the parent
Share capital
4.3
4.3
4.3
Share premium
3.8
3.8
3.8
Revaluation reserve
0.8
0.9
0.8
Retained earnings
10.1
6.7
6.8
Total equity
19.0
15.7
15.7
Condensed consolidated statement of cash flows
Unaudited
Unaudited
Audited
6 Months to
6 Months to
12 Months to
30 06 2021
30 06 2020
31 12 2020
£m
£m
£m
Net cash (used in) / generated by operating activities (see note 5A)
(5.3)
(2.1)
3.7
Investing activities
Investment in minority shareholding
-
(2.0)
(2.0)
Purchase of property, plant and equipment
(0.1)
(0.1)
(0.2)
Net cash generated (used in) / by investing activities
(0.1)
(2.1)
(2.2)
Financing activities
Facility fee
-
(0.1)
(0.1)
Proceeds from bank borrowing
-
15.0
15.0
Equity dividends paid
(1.5)
-
(1.9)
Acquisition of shares by ESOT
(0.5)
-
(0.1)
Repayment of lease obligations
(0.8)
(0.6)
(1.6)
Net cash (used in)/generated from financing activities
(2.8)
14.3
11.3
Net (decrease) / increase in cash and cash equivalents
(8.2)
10.1
12.8
Cash and cash equivalents at beginning of period
25.2
12.4
12.4
Cash and cash equivalents at end of period (see note 5)
17.0
22.5
25.2
Condensed consolidated statement of changes in equity For the six months ended 30th June 2021
Share capital
Share premium
Revaluation reserve
Retained earnings
Total
£m
£m
£m
£m
£m
At 1st January 2021
4.3
3.8
0.8
6.8
15.7
Comprehensive income
Profit for the period
-
-
-
1.5
1.5
Other comprehensive income
Actuarial gain on retirement benefit obligation
-
-
-
5.5
5.5
Deferred income tax on actuarial gain on retirement benefit obligation
-
-
-
(1.1)
(1.1)
Total other comprehensive income
-
-
-
4.4
4.4
Total comprehensive income
-
-
-
5.9
5.9
Transactions with owners
Share based payment debit
-
-
-
(0.9)
(0.9)
Shares acquired by ESOT
-
-
-
(0.5)
(0.5)
Shares distributed by ESOT
0.3
0.3
Dividends paid
-
-
-
(1.5)
(1.5)
Total transactions with owners
-
-
-
(2.6)
(2.6)
At 30th June 2021
4.3
3.8
0.8
10.1
19.0
Condensed consolidated statement of changes in equity For the six months ended 30th June 2020
Share capital
Share premium
Revaluation reserve
Retained earnings
Total
£m
£m
£m
£m
£m
At 1st January 2020
4.3
3.8
0.9
13.9
22.9
Comprehensive income
Loss for the period
-
-
-
(1.2)
(1.2)
Other comprehensive expense
Actuarial loss on retirement benefit obligation
-
-
-
(7.4)
(7.4)
Deferred income tax on actuarial gain on retirement benefit obligation
-
-
-
1.4
1.4
Total other comprehensive expense
-
-
-
(6.0)
(6.0)
Total comprehensive expense
-
-
-
(7.2)
(7.2)
Total transactions with owners
-
-
-
-
-
At 30th June 2020
4.3
3.8
0.9
6.7
15.7
Condensed consolidated statement of changes in equity For the year ended 31st December 2020
Share capital
Share premium
Revaluation reserve
Retained earnings
Total
£m
£m
£m
£m
£m
At 1st January 2020
4.3
3.8
0.9
13.9
22.9
Comprehensive income
Profit for the year
-
-
-
1.2
1.2
Other comprehensive income
Actuarial gain/(loss) on retirement benefit obligation
-
-
-
(6.5)
(6.5)
Deferred income tax on actuarial gain on retirement benefit obligation
-
-
-
1.7
1.7
Minority shareholding equity investment
-
-
-
(2.0)
(2.0)
Total other comprehensive income
-
-
-
(6.8)
(6.8)
Total comprehensive income
-
-
-
(5.6)
(5.6)
Transactions with owners
Transfer on depreciation of freehold properties
-
-
(0.1)
0.1
-
Share based payment credit
-
-
-
0.4
0.4
Shares acquired by ESOT
-
-
-
(0.1)
(0.1)
Dividends paid
-
-
-
(1.9)
(1.9)
Total transactions with owners
-
-
(0.1)
(1.5)
(1.6)
At 31st December 2020
4.3
3.8
0.8
6.8
15.7
Notes to the condensed consolidated financial statements for the six months to 30 June 2021
Note 1 - Basis of preparation
TClarke plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The nature of the Group's operations and its principal activities are set out in Note 2 below and in the interim management report. The consolidated interim financial statements comprise the condensed financial statements of the Company and its subsidiaries (together the 'Group').
These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2020 were approved by the Board of Directors on 24 March 2021 and have been delivered to the Registrar of Companies 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 any statement under section 498 of the Companies Act 2006.
These interim financial statements have been prepared in accordance with both International Accounting Standards in conformity with the requirements of Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ('IFRS'). The Interim Financial Report has been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Conduct 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 31 December 2020.
The interim financial statements have not been audited or reviewed by the Company's auditors.
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 31 December 2020.
Taxes on income in the interim periods are accrued using the estimated effective tax rate that would be applicable to expected total annual earnings.
Estimates and financial risk management
The preparation of interim financial statements requires the Directors to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities at the reporting date and the amounts of revenue and expense incurred during the period that may not be readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
In preparing these interim financial statements, the significant judgements made by the Directors in applying the Group's accounting policies and the key sources of uncertainty together with the Group's financial risk management objectives and policies were the same as those that applied to the financial statements as at and for the year ended 31st December 2020. The principal risks and uncertainties continue to be those which are set out on pages 22-25 of the Group's annual report and accounts for the year ended 31st December 2020, under the following headings: Political, economic and market conditions; Financial strength; Reputation; Winning new work; Contract delivery; People and skills; Health and safety; Supply chain; Pensions; and Cyber security.
Going concern
The Group has a £10m overdraft facility, which is repayable on demand, and a £15m revolving credit facility ("RCF") expiring 31 August 2024. At the half year point the RCF was fully drawn down and the overdraft facility was unutilised. The gross cash balance was £17.0m, resulting in net cash of £2.0m. The Group therefore has up to £27.0m available to support the Group's working capital flows and funding demands during the course of the year.
To support the Group's operations the Group also have available bonding facilities of £40.1m, of which £25.2m is currently unutilised.
After making appropriate enquiries, the Directors are satisfied that the Company and Group have adequate resources to continue their operations for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.
Note 2 - 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; London, UK South & UK North, reporting to the Chief Executive, who is the chief operating decision maker.
30 June 2021
London
UK South
UK North
Group costs and Unallocated
Total
£m
£m
£m
£m
£m
Revenue from contracts with customers
72.8
35.4
30.0
-
138.2
Operating profit
1.0
1.3
1.1
(1.0)
2.4
Finance costs
-
-
-
(0.5)
(0.5)
Profit/(loss) before tax
1.0
1.3
1.1
(1.5)
1.9
Taxation (expense)/credit
-
-
-
(0.4)
(0.4)
Profit/(loss) for the period
1.0
1.3
1.1
(1.9)
1.5
London £m
UK South £m
UK North £m
Total £m
Business sector
Facilities Management
1.0
1.1
4.4
6.5
Infrastructure
9.3
22.8
12.2
44.3
Engineering Services
37.2
6.0
1.8
45.0
Residential & Hotels
12.6
5.3
11.0
28.9
Technologies
12.7
0.2
0.6
13.5
Total revenue
72.8
35.4
30.0
138.2
30 June 2020
London
UK South
UK North
Group costs and Unallocated
Total
£m
£m
£m
£m
£m
Revenue from contracts with customers
58.7
29.1
18.3
-
106.1
Underlying operating profit/(loss)
2.0
0.9
(0.2)
(0.5)
2.2
Non-underlying costs
-
-
-
(3.0)
(3.0)
Amortisation of intangibles
-
-
(0.2)
-
(0.2)
Operating profit
2.0
0.9
(0.4)
(3.5)
(1.0)
Finance costs
-
-
-
(0.5)
(0.5)
Profit/(loss) before tax
2.0
0.9
(0.4)
(4.0)
(1.5)
Taxation (expense)/credit
-
-
-
0.3
0.3
Profit/(loss) for the period
2.0
0.9
(0.4)
(3.7)
(1.2)
London £m
UK South £m
UK North £m
Total £m
Business sector
Facilities Management
1.1
5.0
3.0
9.1
Infrastructure
7.1
12.2
8.4
27.7
Engineering Services
27.1
6.1
1.8
35.0
Residential & Hotels
7.8
5.6
4.6
18.0
Technologies
15.6
0.2
0.5
16.3
Total revenue
58.7
29.1
18.3
106.1
31 December 2020
London
UK South
UK North
Group costs and Unallocated
Total
£m
£m
£m
£m
£m
Revenue from contracts with customers
134.6
55.1
42.2
-
231.9
Underlying operating profit/(loss)
4.9
2.7
0.7
(2.3)
6.0
Restructuring costs
-
-
-
(3.7)
(3.7)
Amortisation of intangibles
-
-
(0.2)
-
(0.2)
Operating profit/(loss)
4.9
2.7
0.5
(6.0)
2.1
Finance costs
-
-
-
(0.9)
(0.9)
Profit/(loss) before tax
4.9
2.7
0.5
(6.9)
1.2
Taxation expense
-
-
-
-
-
Profit/(loss) for the year
4.9
2.7
0.5
(6.9)
1.2
London £m
UK South £m
UK North £m
Total £m
Business sector
Facilities Management
2.4
9.7
5.7
17.8
Infrastructure
20.6
22.1
16.2
58.9
Engineering Services
59.4
15.7
6.5
81.6
Residential & Hotels
21.7
7.6
12.8
42.1
Technologies
30.5
-
1.0
31.5
Total revenue
134.6
55.1
42.2
231.9
Note 3 - Taxation expense
The effective corporation tax rate applied for the period is 19.0% (30 June 2020: 19.0%).
Note 4 - 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.
Unaudited 30 06 2021 £m
Unaudited 30 06 2020 £m
Audited 31 12 2020 £m
Earnings
Profit/(loss) attributable to owners of the Company
1.5
(1.2)
1.2
Weighted average number of ordinary shares (000s)
41,898
42,211
42,295
Basic earnings per share
3.58p
(2.85)p
2.87p
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 Share Option Scheme, and conditional share awards and options granted under the Equity Incentive Plan. Further details of these schemes are given in note 19 of the 2020 annual report and financial statements.
Unaudited 30 06 2021 £m
Unaudited 30 06 2020 £m
Audited 31 12 2020 £m
Earnings
Profit/(loss) attributable to owners of the Company
1.5
(1.2)
1.2
1.5
(1.2)
1.2
Weighted average number of ordinary shares in issue (000s)
41,898
42,211
42,295
Adjustments
Savings Related Share Options (000s)
451
385
295
Equity Incentive Plan
Conditional share awards (000s)
1,982
2,453
2,453
Weighted average number of ordinary shares for diluted earnings per share (000s)
44,331
45,049
45,043
Diluted earnings per share
3.38p
(2.85)p
2.69p
C. Underlying earnings per share
Underlying earnings per share represents the profit for the period adjusted for amortisation of intangible assets and non-underlying 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:
Unaudited 30 06 2021 £m
Unaudited 30 06 2020 £m
Audited 31 12 2020 £m
Profit attributable to owners of the Company
1.5
(1.2)
1.2
Adjustments
Amortisation of intangible assets
-
0.1
0.1
Restructuring costs
-
3.0
3.0
Tax effect of adjustments
-
(0.5)
-
Underlying profit after tax
1.5
1.4
4.3
Weighted average number of ordinary shares in issue (000s)
41,898
42,211
42,295
Adjustments
Savings Related Share Options (000s)
451
385
295
Equity Incentive Plan
Conditional share awards (000s)
1,982
2,453
2,453
Weighted average number of ordinary shares for diluted earnings per share (000s)
44,331
45,049
45,043
Underlying earnings per share
3.58p
3.10p
9.66p
Diluted underlying earnings per share
3.38p
2.90p
10.29p
Note 5 - Notes to the consolidated statement of cash flows
A. - Reconciliation of operating profit to net cash from operating activities
Unaudited 30 06 2021 £m
Unaudited 30 06 2020 £m
Audited 31 12 2020 £m
Operating profit/(loss)
2.4
(1.0)
2.1
Depreciation charges
1.0
1.2
2.1
Equity settled share based payments
(0.6)
0.2
0.4
Amortisation of intangible assets
-
0.2
0.2
Additional pension contributions
(0.8)
(2.9)
(1.5)
Defined benefit pension scheme movement
0.2
(0.4)
(1.7)
Operating cash flows before movements in working capital
2.2
(2.7)
1.6
Movement in inventories
-
-
(0.2)
(Increase) / Decrease in contract balances
(14.0)
6.4
3.9
(Increase) / Decrease in operating trade and other receivables
(2.4)
10.9
3.8
Increase / (Decrease) in operating trade and other payables
9.2
(16.3)
(4.5)
Cash (used in) / generated by operations
(5.0)
(1.7)
4.6
Corporation tax paid
-
(0.2)
(0.6)
Interest paid
(0.3)
(0.2)
(0.3)
Net cash (used in) / generated by operating activities
(5.3)
(2.1)
3.7
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.
Note 6 - 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 31 December 2020. There have been no material changes in these relationships in the six months ended 30 June 2021 that have materially affected the financial position or performance of the Group during that period.
Note 7 - Pension commitments
The present value of the defined benefit retirement benefit scheme and the related past and current service costs were measured using the projected unit credit method. The amount included in the statement of financial position arising from the Group's obligations in respect of its defined benefit retirement benefit scheme is as follows:
Unaudited 30 06 2021 £m
Unaudited 30 06 2020 £m
Audited 31 12 2020 £m
Present value of defined benefit obligations
69.9
73.5
76.3
Fair value of scheme assets
(45.4)
(43.6)
(46.1)
Deficit in scheme recognised in the statement of financial position
24.5
29.9
30.2
Key assumptions used
Rate of increase in salaries
2.90%
2.45%
2.60%
Rate of increase of pensions in payment
3.10%
2.80%
3.00%
Discount rate
2.00%
1.60%
1.40%
Inflation assumption
3.20%
2.90%
2.90%
Mortality assumptions (years)
Unaudited 30 06 2021
Unaudited 30 06 2020
Audited 31 12 2020
Life expectancy at age 65 for current pensioners:
Men
21.8
21.7
21.8
Women
24.1
23.9
24.1
Life expectancy at age 65 for future pensioners (current age 45)
Men
22.8
22.7
22.8
Women
25.3
25.1
25.2
Statement of Directors' responsibilities
The Directors confirm that the condensed interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and
· material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.
On behalf of the Board
Iain McCusker - Chairman
Mark Lawrence - Chief Executive
Trevor Mitchell - Finance Director
20 July 2021
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