22nd Aug 2014 12:14
LONDON (Alliance News) - North Midland Construction PLC Friday said it has decided it won't pay an interim dividend this year, despite swinging to profit in the first half, saying it wants to remain prudent while it sorts out and settles remaining problematic legacy building contracts.
The provider of civil engineering, building, mechanical and electrical services to public and private organisations has been beset by a number problems in recent times, and most recently it was hit by cost overruns on some contracts and unfavourable settlements on others where clients had got into financial difficulties.
It posted a pretax profit of GBP371,000 for the six months ended June 30, compared with a GBP480,000 loss a year earlier, as revenue rose to GBP91.0 million from GBP89.4 million, and provisions for the unfavourable contracts fell.
Still, the company said problems still remain in its building and civil engineering unit, which has been completely restructured under new management, with the resolution of three legacy contracts. The division made an operating loss of GBP840,000, down from the GBP1.58 million loss it booked a year earlier, as revenue fell 31% to GBP11.72 million, from GBP16.8 million.
North Midland said progress is being made on the resolution of other contracts, but the timing is proving to be problematic.
Its NMCNomenca division had an "encouraging" first half, with operating profit increasing to GBP940,000, from GBP87,000 a year earlier, as revenue rose 11% to GBP41.3 million from GBP37.3 million. The unit was awarded an asset maintenance contract by Severn Trent PLC worth GBP6 million a year. The framework is for five years, with the option of a two year extension.
North Midland said its highways division suffered from a slower start to the year than originally forecast, with delays in anticipated expenditure on secured frameworks and in the award of a major project. Despite this, revenue for the unit rose to GBP7.7 million from GBP6.0 million, but this was insufficient to cover the overheads, which had been increased in anticipation of increased revenue. As a result the division reported an operating loss.
"Secured revenue [for the highways division] this year currently stands at GBP24.60 million, so the second half-year will show a significant increase and a return to profitability," North Midland said.
Overall, North Midland said its return to profitability is "encouraging" and orders received to date to be executed this financial year stand at GBP178 million.
However, it has decided not to pay an interim dividend, even though it paid an interim dividend of 3 pence a share in 2013.
"Maximum effort is being expended to bring the legacy contracts to conclusion and settlement, and whilst the group continues to trade profitably, there is still potential risk in the resolution of these legacy contracts," Chairman Robert Moyle said in a statement.
"Accordingly, the directors feel that a prudent approach has to be adopted and feel, therefore, that the payment of an interim dividend is inappropriate," he added.
North Midland Construction shares were quoted down 2.9% at 108.30 pence Friday afternoon.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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