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Interim Results

Released 07:00 10-Aug-2017

RNS Number : 5840N
North Midland Construction PLC
10 August 2017
 

10 August 2017

 

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

 

NORTH MIDLAND CONSTRUCTION PLC

UNAUDITED CONDENSED GROUP HALF YEARLY FINANCIAL STATEMENTS

 

North Midland Construction PLC (the "Company"), the UK provider of Power, Construction, mechanical and electrical services to public and private organisations, announces interim results for the six months ended 30 June 2017.

 

Highlights:-




Six Months Ended


Six Months Ended




30 June 2017


30 June 2016




£'000


£'000

Revenue



 

135,134


129,580







Profit Before Tax



1,220


512













Total Comprehensive Income



982


476







Earnings per Share



9.67p


4.69p







Proposed Dividends



3.0p


1.5p

 

Revenue increased by 4.3% compared with H1 2016.

 

Profit before tax increased by 138.3% to £1.22 million (H1 FY16: £0.51 million).

 

Return to profitability of £0.03 million in the Telecommunications division (H1 FY16: loss of £1.56 million).

 

Cash of £7.93 million an increase of 175.4% (H1 FY16: £2.88 million), inclusive of one off early receipt of £1.63 million (H1 FY16: £NIL).

 

Increased proposed dividend to 3.0p (H1 FY16: 1.5p)

 

John Homer - Chief Executive - Commented:

 

"These results demonstrate the continued strategic advancement made in the business during the trading period. Our focus on enhanced margins and cash generation is beginning to become apparent and is anticipated to continue going forwards.

 

We continue to invest significantly in the development of our talent pool as we believe that our people are the overarching differentiator and the driver for our continued success.

 

The outlook for our future trading remains positive and provides the opportunity to further improve the earnings from our operations. The Board is anticipating enhanced like-for-like revenue growth in the second half of the year, coupled with an enhanced operating margin percentage."

 

For further information:-

 



John Homer, Chief Executive

Daniel Taylor, Group Finance Director

01623 518008

North Midland Construction PLC


 

 

CHAIRMAN'S STATEMENT

 

It is pleasing to report that the momentum generated in the first quarter, reported at the Annual General Meeting on 18 May 2017 has been maintained.  A half-year profit before tax of £1.22 million (H1 FY16: £0.51 million) was generated from revenues which increased by 4.3% to £135.13 million (H1 FY16: £129.58 million).

 

The half-year result for Construction was affected by delays in secured projects getting underway, so both revenue and profitability were impacted.  Revenue declined by 3.4% to £11.20 million (H1 FY16: £11.59 million) and profitability by 68.5% to £78,000 (H1 FY16: £248,000).  The aforementioned projects are now well underway and the remaining order book to be completed this year currently stands at £23.50 million giving confidence that the full year's targets will be achieved.  Secured revenues for 2018 currently are £15.00 million.

 

Power has suffered from a shortage of orders with revenues in the period declining by 46.0% to £7.47 million (H1 FY16: £13.83 million) and has consequently produced a loss of £151,000 (H1 FY16: £127,000 profit).  A return to profitability is forecast for the second half-year.

 

Highways, on the back of resilient infrastructure expenditure, has increased revenues by 6.3% to £21.30 million (H1 FY16: £20.04 million) and profitability by 18.8% to £0.26 million (H1 FY16: £0.22 million).  Secured workload to date for the remainder of the year is circa £16 million.

 

The Telecommunications market remains buoyant and revenues increased by 16.6% to £18.04 million (H1 FY16: £15.47 million) and a return to profitability was achieved, amounting to £32,000 (H1 FY16: £1.56 million loss).  The return to profitability is encouraging, but the turnaround and reorganisation is not yet complete.  A cautious perspective to the year-end out-turn is being adopted.

 

The Water sector continues to be a major market for the Group and several major projects are currently being undertaken either directly or in collaboration with partners.  The most recent being the award of a new joint venture infrastructure contract for Severn Trent Water on the Birmingham Resilience Project worth in excess of £100 million.  The AMP6 cycle is now well underway and consequently revenues escalated by 12.3% to £77.13 million (H1 FY16: £68.65 million).  However, due to a cautious perspective being adopted on the out-turn of several newly commenced projects combined with the initial start-up costs of these projects, profitability declined by 30.3% to £1.11 million (H1 FY16: £1.59 million).  Confidence is high that our internal forecast for the year will be achieved.

 

The resolution of the outstanding legacy contract is still ongoing, but progressing slowly.  The Directors are striving to seek a satisfactory resolution.

 

The improved performance has resulted in a significant enhancement of the half-year bank position, albeit that this has been inflated due to a major one-off early receipt.  Current cash at 30 June 2017 was £7.93 million (H1 FY16: £2.88 million).

 

As a result of increased revenues emanating from both the Birmingham Resilience Project award and a robust construction market, the results for the year to 31 December 2017 are expected to be ahead of management expectations.  The Board has the confidence, therefore, to propose a doubling of the interim dividend to 3.0p per share (H1 FY16: 1.5p per share).  The dividend will be paid on 15 September 2017 to shareholders on the register at 18 August 2017.

 

 

Robert Moyle

Chairman

North Midland Construction PLC

10 August 2017



UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME

 

The unaudited condensed Group results for the half year ended 30 June 2017 are shown below together with the unaudited Group results for the half year ended 30 June 2016 and the audited Group results for the year ended 31 December 2016.


Six Months Ended 30 June

Year Ended


2017


2016


31 December 2016


£'000


£'000


£'000

Revenue

135,134


129,580


250,489

Other operating income

133


219


325


135,267


129,799


250,814

Raw material and consumables

(22,838)


(22,007)


(39,291)

Other external charges

(73,048)


(75,286)


(143,564)

Employee costs

(33,799)


(28,403)


(58,738)

Depreciation of property, plant & equipment

(1,489)


(1,186)


(2,400)

Other operating charges

(2,768)


(2,294)


(4,580)

Operating profit

1,325


623


2,241

Finance costs

(105)


(111)


(179)

Profit before tax

1,220


512


2,062

Tax (Note 4)

(238)


(36)


572

Profit for the period

982


476


2,634

Other comprehensive income

-


-


-

Total comprehensive income for the period

982


476


2,634

 

Attributed to:-






Equity holders of the parent

982


476


2,634


982


476


2,634

Earnings per share basic and diluted (Note 3)

9.67p


4.69p


25.95p

Dividend per share (Note 5)

3.0p


1.5p


1.5p







 

 

UNAUDITED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

 






Capital






Share


Merger


Redemption


Retained




Capital


Reserve


Reserve


Earnings


Total


£'000


£'000


£'000


£'000


£'000

Balance at 1 January 2016

1,015


455


20


8,727


10,217

Profit  and total comprehensive income for the period

-


-


-


476


476

Dividends paid

-


-


-


-


-

Balance at 30 June 2016

1,015


455


20


9,203


10,693

Profit  and total comprehensive income for the period

 

-


 

-


 

-


2,158


2,158

Dividends paid

-


-


-


(152)


(152)

Balance at 31 December 2016

1,015


455


20


11,209


12,699

Profit and total comprehensive income for the period

-


-


-


982


982

Dividends paid

-


-


-


(303)


(303)

Balance at 30 June 2017

1,015


455


20


11,888


13,378

 



 

The unaudited condensed Group Balance Sheets as at 30 June 2017 and 30 June 2016 are shown below together with the audited Group Balance Sheet as at 31 December 2016.

 




30 June

31 December




2017


2016


2016




£'000


£'000


£'000

Assets














Non-Current Assets








Property, plant and equipment


14,975


13,011


 13,651


Deferred tax asset


1,201


705


1,411




16,176


13,716


15,062

Current Assets








Inventories


1,950


1,964


2,065


Construction contracts


18,048


15,801


19,165


Trade and other receivables


40,943


39,433


30,705


Cash and cash equivalents


7,925


2,878


11,405




68,866


60,076


63,340








Total Assets


85,042


73,792


78,402









Equity & Liabilities














Capital & Reserves attributable to equity holders of the Parent








Share capital


1,015


1,015


1,015


Merger reserve


455


455


455


Capital redemption reserve


20


20


20


Retained earnings


11,888


9,203


11,209

Total Equity


13,378


10,693


12,699








Liabilities














Non-current Liabilities








Obligation under finance leases

- due after one year


2,703


2,004


1,785


Provisions


394


394


394



3,097


2,398


2,179

Current Liabilities








Trade & other payables


66,048


58,626


61,145


Current income tax payable


219


54


194


Obligations under finance leases

- due within one year


2,300


2,021


2,185




68,567


60,701


63,524








Total Liabilities


71,664


63,099


65,703








Total Equity & Liabilities


85,042


73,792


78,402

 



UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS

 

The unaudited condensed Group statement of cash flows for the periods ended 30 June 2017 and 30 June 2016 are shown below together with the audited Group statement of cash flows for the year ended 31 December 2016.

 



Six Months Ended 30 June


Year Ended



2017


2016


31 December

2016



£'000


£'000


£'000

Cash flows from operating activities







Operating profit


1,325


623


2,241

Adjustments for:







Depreciation of property, plant and equipment


1,489


1,185


2,400

Gain on disposal of property, plant and equipment


(130)


(215)


(317)

Increase in provisions


-


33


33








Operating cash flows before movements in







working capital


2,684


1,626


4,357








Decrease in inventories


115


371


270

Decrease/(increase) in construction contracts


1,117


1,736


(1,628)

(Increase)/decrease in receivables


(10,238)


(8,039)


690

Increase in payables


4,903


2,040


4,557








Cash (used in)/generated from operations


(1,419)


(2,266)


8,246








Income tax received


-


21


78

Interest paid


(105)


(111)


(61)

Net cash (used in)/generated from operating activities


(1,524)


(2,356)


8,263








Cash flows from investing activities







Purchase of property, plant and equipment

(444)


(477)


(1,303)

Proceeds on disposal of property, plant and equipment

132


353


475

Net cash used in financing activities


(312)


(124)


(828)








Cash flows from financing activities







Equity dividends paid


(303)


-


(152)

Repayments of obligations under finance leases


(1,341)


(1,263)


(2,381)

Interest payable under finance leases


-


-


(118)

Net cash used in financing activities


(1,644)


(1,263)


(2,651)








Net (decrease)/increase in cash and cash equivalents

(3,480)


(3,743)


4,784

Cash and cash equivalents at 1 January 2017


11,405


6,621


6,621

Cash and cash equivalents at 30 June 2017


7,925


2,878


11,405

 


1.

Basis of preparation


The unaudited condensed Group half-yearly financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, and have been prepared on the basis of International Financial Reporting Standards (IFRSs) as adopted by the European Union that are effective for the full year ending 31 December 2016.  They do not include all of the information required for full annual financial statements.  These condensed consolidated half-yearly financial statements have not been subject to audit or review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 by the company's auditor, do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2016.  The comparative figures for the year ended 31 December 2016 are not the Group's statutory accounts for that financial year.  Those accounts have been reported upon by the Group's auditor and delivered to the Registrar of Companies.  The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under Section 435 and 498 (2) or (3) respectively of the Companies Act 2006.




The Board regularly reviews financial statements, cash balances and forecasts and the Directors confirm that they consider the Group has adequate resources to continue to operate for the foreseeable future.  Accordingly they continue to adopt the going concern basis in preparing the unaudited condensed Group half yearly financial statements.




The accounting policies adopted in the preparation of the unaudited condensed Group half-yearly financial statements to 30 June 2017 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2016.  The Group has considered amendments to existing standards and interpretations that are effective for the year ending 31 December 2017 and is of the view that they have no impact on the unaudited condensed Group half-yearly accounts, except for as noted below with IFRS 15 'Revenue from Contracts with Customers'.




The preparation of unaudited condensed Group half-yearly financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.




In preparing these unaudited condensed Group half-yearly financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2016.




The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2016.

 

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 introduces a single, principles based, five-step model to measuring and recognising revenue from contracts with customers, based on the transfer of control of goods and services to customers. It replaces the separate models for goods, services and construction contracts currently included in IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related interpretations. IFRS 15 will be adopted by the Group with effect from 1 January 2018.

 

The Group is continuing to undertake its assessment of the impact of IFRS 15, through a review of existing major contracts. The quantitative impact of the initial application of IFRS 15 is not known or reasonably estimable at the time of preparation of these interim financial statements.

 

 



2.

Segment reporting


 

Business segments

The Group is composed of the following operating markets which are conducted in the UK and are effectively market sectors:

 

•              Construction

•              Power

•              Highways

•              Water

•              Telecommunications

 

The Group manages its operating segments' trading performance and working capital by monitoring operating profit and centrally manages Group taxation, capital structure and expenditure including net equity and net debt.

 

 

Segment revenue and profit

 

 



Six Months Ended 30 June 2017










Construction


Power


Highways


Telecoms


Water


Total

 


£'000


£'000


£'000


£'000


£'000


£'000

 

Revenue












 

  External sales

11,201


7,468


21,297


18,039


77,129


135,134

 













 

Result before












 

corporate expenses

699


409


1,234


943


5,811


9,096

 













 

Corporate expenses

(621)


(560)


(975)


(911)


(4,704)


(7,771)

 













 

Operating profit/(loss)

78


(151)


259


32


1,107


1,325

 

Net finance costs











(105)

 

Profit before tax











1,220

 

Tax











(238)    

 

Total comprehensive income for the period






982

 











 











 











 

 

 


Six Months Ended 30 June 2016










Construction


Power


Highways


Telecoms


Water


Total

 


£'000


£'000


£'000


£'000


£'000


£'000

 

Revenue












 

  External sales

11,593


13,827


20,038


15,469


68,653


129,580

 













 

Result before












 

corporate expenses

910


640


821


(852)


5,323


6,842

 













 

Corporate expenses

(662)


(513)


(603)


(707)


(3,734)


(6,219)

 













 

Operating profit/(loss)

248


127


218


(1,559)


1,589


623

 

Net finance costs











(111)

 

Profit before tax











512

 

Tax











(36)

 

Total comprehensive income for the period






476

 

 

 

Segment assets





        30 June


2017


2016






£'000


£'000

Construction

8,765


11,464

Power

12,261


6,703

Highways

14,714


15,048

Telecommunications

21,911


17,081

Water

27,391


23,496

Total segment assets and consolidated total assets

85,042


73,792





For the purpose of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible and financial assets attributable to each segment.  Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments.


 

Other segment information


Depreciation and


Additions to


amortisation


non-current assets


30 June


30 June


2017


2016


2017


2016


£'000


£'000


£'000


£'000

Construction

154


124


290


163

Power

103


148


194


194

Highways

293


215


552


281

Telecommunications

248


166


467


217

Water

691


532


1,300


696


1,489


1,185


2,803


1,551









There were no impairment losses recognised in respect of property, plant and equipment.


All of the above relates to continuing operations and arose in the United Kingdom.


Information about major customer

Revenues of approximately £52,346,000 (2016: £55,483,000) were derived from a single external customer.  These revenues are attributable to the Power and Water segments.

 

3.

Earnings per share


The basic and diluted earnings per share are the same and have been calculated on profits of £982,000 (2016:  profits of £476,000) and a weighted average number of shares in issue of 10,150,000 (2016: 10,150,000).



4.

Taxation


In respect of the six months ended 30 June 2017, the corporation tax effective rate was 19.5% (2016: 20%). A corporation tax provision has been included in relation to the taxable profits of the company.



5.

Dividends


Amounts recognised as distributions to equity holders in the half year:-



Six Months to June



2017


2016



£'000


£'000


Final dividend for the year ended 31 December 2016 of £3.0p (2015: £Nil) per share.

303


-







The Directors propose an interim dividend of 3.0p (2016: 1.5p) per share, total £305,000 (2016: £152,000), which will be paid on 15 September 2017 to the shareholders on the register at 18 August 2017.





 

6.

Related parties


The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers.

 

The Company previously advised that on 29 March 2017, SPARK Advisory Partners Limited ("SPARK"), the Company's sponsor (in respect of this matter only), notified the Financial Conduct Authority (the "FCA") of a breach of the Listing Rules in relation to the related party transactions. SPARK also notified the FCA that the Company has a "controlling shareholder" (being the Moyle family and its associates) for the purposes of the Listing Rules in respect of which there is no agreement in place as required by Listing Rule 9.

 

The Company has now received a formal response from the FCA in respect of these breaches of the Listing Rules. The FCA's review has now been concluded and they do not intend to take any further action in relation to these matters at the present time. The basis of the FCA's decision was due to the following confirmations having been made:

1.     SPARK has confirmed to the FCA that the transactions entered into between the Company and Mr R Moyle were fair and reasonable as far as the shareholders of the Company were concerned; and

2.     SPARK has confirmed to the FCA that agreements, as required by LR 9.2.2AR(2)(a), have been put in place between the Company, Mr R Moyle and the Moyle family trusts






7.

Contingent liabilities


Lloyds Bank PLC, Aviva Insurance Limited and HCC International Insurance Co. Ltd have given Performance Bonds to a value of £9,360,000 (2016 : £6,521,000) on the Group's behalf.  These bonds have been made with recourse to the Group.



8.

Seasonality


The Group's activities are not subject to significant seasonal variations.



9.

Principal risks and uncertainties


The Board consider the principal risks and uncertainties relating to the Group for the next six months to be the same as detailed in the last Annual Report and Accounts to 31 December 2016.



10.

Responsibility Statement of the Directors in respect of the half-yearly financial report


We confirm that to the best of our knowledge:




·           

the condensed set of financial statements, which has been prepared in accordance with IAS 34 and the ASB's 2007 statement of Half Year Reports, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;





·           

the interim management report includes a fair review of the information required by:






(a)

DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year 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







(b)

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

J Homer

Chief Executive

 


D A Taylor


Group Finance Director


 

10 August 2017


This information is provided by RNS
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