TClarke delivers in the First Year of £500m Revenue Growth Plan : Chief Executive’s Report
9/3/22
Ready to Deliver
TClarke is a trusted engineering partner to blue chip clients and principal contractors. Within this report I set out our strategic plans and achievements for the past year but more importantly describe with confidence how the business is achieving its goals.
Last year we committed to a strategy of moving TClarke to the next level and we described very clearly and concisely our ambitions, whilst adapting quickly and decisively to the continually changing circumstances that the country faced.
TClarke aims to be a £500m revenue business with sustainable margins of 3% supporting a progressive dividend policy. Our business is underpinned by strict financial and operational controls and strong governance. Our growth ambitions are supported and financed without the need for often risky and distracting acquisitions.
New Revenue Streams
Within our business model we target five market sectors. Our established annual revenues for the business are around £330m and our strategy to reach revenues of £500m is based upon these five established sectors and the new revenue streams described below which should easily generate an additional £170m of annual revenues.
- Securing larger projects outside of London with typical project values of £5m – £10m and £10m+.
- Securing data centres particularly in the UK, with typical project values of £25m – £50m with the European data centre market remaining an aspiration.
- Securing healthcare projects across the UK with typical project values ranging from £200k to £20m+.
- Developing innovative smart building solutions which bring recurring revenue streams.
I am confident that our £500m revenue target can be achieved by organic growth whilst remaining true to the established engineering strengths of the business.
This strategy is evidenced by the continuous growth of our forward order book; our order book stood at a record £534m as at 31st December 2021 (£456m 31st December 2020). The order book growth has been achieved whilst continuing to follow our selective tendering approach.
Investing in the Best People
Differentiated by the quality of our people and their relentless drive to deliver the most successful projects, the ability to grow our business and meet our ambitions could not be achieved without the dedication of our great teams. Our careful attention to resource planning will ensure we always match our capacity to our available teams.
Being one of the few industry trainers of apprentices across the UK leads to a wealth of future talent, designed to deliver both engineering operatives and future leaders in volume and quality to meet our needs. The ability to deliver projects primarily with a trusted reliable workforce ensures that our reputation for quality and delivery on time is more secure compared to that of our competitors whose models are dependent upon the use of sub-contractors.
Scale and Resource Across the UK
TClarke is very well established in its London heartland and 2021 has seen significant progress in ensuring that we can offer our clients the same scale and breadth of services across the UK. During 2021 we expanded our capacity in our Engineering Services Divisions in Falkirk, Peterborough and Newcastle; the increased opportunities are now translating into additional revenues for these locations.
Our teams in Manchester and Peterborough have been successful in securing four projects valued in excess of £25m for an international financial institution at several locations including two solar farm projects covering 1,800 m2 and our new Oxford office celebrated its successful opening by securing a project at the prestigious Oxford Saïd Business School.
We continue to invest in our own purpose-built facility at Stansted, that supports Modern Methods of Construction (MMC). The use of offsite prefabrication benefits our clients and can bring programme certainty and factory standard quality, and by utilising less on-site resources gives us more capacity to deliver additional revenues as a part of our strategy to achieve £500m revenue.
Previously our regional teams would have focused on the smaller to medium sized projects, often teaming up with local partners. Today from our three operating divisions that serve 20 UK locations, we offer the full range of Engineering Services, alongside all the complementary technology and smart building solutions, backed up by technical expertise.
TClarke is proud to be based in the communities it serves and wants to ensure that we offer our teams the best environments to collaborate, share knowledge and build exciting careers. In October our team in Manchester moved to larger premises in Salford Quays, in early 2022 our teams in Falkirk will be moving to new offices in Eurocentral, Scotland and our London Head Office will relocate to 30 St Mary Axe whereby our teams will operate from a single productive floor space.
Exponential Growth in Data Centre Opportunities
The growth in the demand for data centres has been fuelled by the needs of cloud storage, more devices being connected to the internet (IoT), gaming, streaming services, e-commerce, the arrival of 5G and the working from home revolution.
The UK data centre market is the largest in Western Europe. Brexit and the switch to new UK specific data protection legislation has led many organisations to open or expand data centre facilities. Several large-scale developers have entered the data centre market in the last 12 months. Arizton Advisory and Intelligence predict the UK data centre market size to reach £6bn by 2026.
At the end of 2021 TClarke were active on 5 data centre projects with a collective value of £150m with further opportunities of additional phases. Depending on the pace of our clients’ expansion plans this value could grow by negotiation by an additional £75m. Through 2022 we are aware of and tracking bidding opportunities of circa £900m and a further pipeline of project opportunities that will build out well into 2026.
The strength of the TClarke balance sheet and the depth of our engineering resources means we expect to see strong growth within our revenues in the technologies sector. This could represent at least 30% of our expanded annual revenues in 2022 and beyond.
Healthcare, Healthcare, Healthcare
The 2021 UK Government Spending Review confirmed a total of £100bn of investment in economic infrastructure up to 2024-25. The Chancellor of the Exchequer announced that this includes a £5.9bn capital investment in the National Health Service (NHS) in addition to the £12bn per year that was promised in September 2021. The NHS has launched a six year National Framework Agreement for the provision of Smart Building Solutions, TClarke has successfully secured a place on this framework agreement.
Secured orders in healthcare schemes now stand at £42m. In addition, we have preferred bidder status for a further £63m of projects. Whilst it takes longer to convert a tender to a secured order in this sector there are tremendous opportunities both as a participant in one of the seven frameworks we are on, but also from standalone capital projects.Example of secured projects within the Group include:
- Modernising Medicine – Kings College Hospital NHS Foundation Trust
- Emergency Department Refurbishment – Royal Devon and Exeter Hospital NHS Foundation Trust
- New MRI and Oncology Unit – Royal Cornwall Hospitals Trust
- Infrastructure Upgrade – University Hospitals Bristol and Weston NHS Foundation Trust
- Emergency Department Refurbishment – Luton and Dunstable University Hospital
A Smart New World
Our clients are setting ambitious decarbonisation plans. Smart Buildings – new or retrofits – will be integral to UK plans to reduce its carbon footprint and control energy consumption. The global smart building market is projected to triple in the next decade. The increasing costs of energy and legislation related to the environment in areas such as carbon emission and pollution are all driving building owners towards smart building solutions.
Our technologies business recently secured the Smart Buildings contract for the European Bank of Redevelopment at One Bank Street, including the role of Master Systems Integrator.
Taking part in the smart buildings revolution involves the design and installation of the building’s mechanical, electrical, security and safety systems – all existing TClarke strengths. As we move forward each project opportunity that we bid has the ability to lead to a Smart Building Opportunity for our Technologies Division. Furthermore, by utilising our shared workforce and project teams, the more of our services from our Mechanical, Electrical and Technologies teams that are selected, the more compelling the value engineering solutions we can offer to our clients.
The Specialist Contractor of Choice
Risks and rewards are highest for larger, more complex projects such as commercial offices, luxury hotel and leisure complexes, hospitals and major education or research facilities. This drives clients and principal contractors towards engineering services providers such as TClarke which have the necessary skills, governance and financial strength required to mitigate those risks.
In London the excellent performance of our engineering services teams has not only completed significant schemes such as Project Green and 1 Newman Street, but has also been rewarded with landmark wins such as the Apple fit out at Battersea Power Station, Plot A2 at Canada Water and Building S4 at the International Quarter London, our 4th successive project win at this development in Stratford.
TClarke has experienced a mini boom in luxury and high-end hotels. We successfully completed the Pan Pacific Hotel, and the Hilton City Canopy Hotel in London and work continues on the Peninsular Hotel at Hyde Park Corner. This is another major market sector where the quality of our work and collaborative approach is highly valued and has led to TClarke becoming the preferred contractor on significant hotel schemes in London’s West End.
Our UK North and UK South teams both won significant major residential projects as part of our targeted tendering approach. Building our order book with these quality residential projects and quality relationships is key to sustainable long-term growth and repeat business. The trend towards more complex, high value residential developments featuring a range of luxury facilities has substantially increased the complexity and value of package of works in those projects.
Our Infrastructure teams remain focused on the major areas of public sector infrastructure where complexity and new technologies play to our skill and quality advantages. During the year we enjoyed ongoing success in education, delivering 63 education projects and adding 36 new education projects in the forward order book.
Educational projects that were completed last year include:
- Foxgrove School, Leatherhead
- Nanskar Primary School, Hillingdon
- Pinner High School, Harrow
- Tring School, Hertfordshire
- Turing House, Richmond
- Uckfield College, East Sussex
In summer 2021, a further 50 new schools were announced within the second round of the UK government’s School Rebuilding Programme which is due to deliver 500 rebuilding projects over the next decade we are confident that this sector will continue to be a good revenue stream.
Summary and Outlook
Our people share our vision for the future of TClarke. We are a business with people on the ground delivering our projects. Their innovation, commitment and dedication is something that this business is rightly proud of.
Our order book will translate to record revenues; TClarke can offer our clients the widest possible solutions from a single contractor, utilising our resources so that they are assured we have the ability to deliver. That’s why we believe TClarke remains the contractor of choice for so many and we remain focused on maintaining our market leading position.
We start 2022 in excellent shape and well placed to deliver a strong future performance.
Mark Lawrence
Group Chief Executive Officer
8th March 2022