8th Apr 2010 07:00
NORTH MIDLAND CONSTRUCTION PLC
2009 PRELIMINARY RESULTS
North Midland Construction PLC ("the Company") the UK provider of civil engineering, building, mechanical and electrical services to public and private organisations, announces preliminary results for the year ended 31 December 2009.
Highlights from the results and the Chairman's Statement:-
|
|
Year ended 31 December 2009 £'000 |
Year ended 31 December 2008 £'000 |
|
Revenue Operating profit before exceptional items Exceptional items Profit before tax Profit for the year Earnings per share Dividends per share |
144,185 3,365 (1,594) 1,554 597 4.40p 8.50p |
202,215 3,335 - 2,875 2,034 18.65p 8.50p |
·; Profit before tax and exceptional item £3,148,000 an increase of 9.5%.
·; Full provision of £1,594,000 has been made as an exceptional item for the fine levied by the Office of Fair Trading, together with anticipated legal costs of the appeal.
·; Group Revenue is down by 28.7%, but operating margins improved.
·; The two problematical contracts in the Civil Engineering division now resolved.
·; Improved performance from Utilities division.
·; Building subsidiary hit particularly hard by recessionary climate.
·; Cash inflow of £9.7million during year.
·; Secured workload for 2010 at £120million.
·; The Group has numerous long term framework agreements in place
·; Proposed final dividend of 6.0p (2008 - 6.0p)
For further information:-
Robert Moyle, Chairman 01623 518812
Michael Garratt, Finance Director - 01623 518816
Chairman's Statement
It is very pleasing to report a result, in spite of the extremely difficult economic conditions currently prevailing, before exceptional items, both in excess of the forecast and that of the previous year. Revenue declined by 28.7% to £144.2million, but profit before tax and exceptional items rose by 9.5% to £3.15million. As previously announced, a fine of £1.54million was levied against the company on 21 September 2009 by the OFT and a provision of £1.59million for this fine and associated estimated legal costs has been made in the accounts as an exceptional item. An appeal has been lodged and a hearing date of 9 July 2010 has been set. A breakdown of the results is now provided by division and subsidiary.
Civil Engineering
The civil engineering division experienced another very difficult year with a further reduction in tender opportunities and curtailments in expenditure on framework contracts. There are a record number of tender submissions in abeyance, either awaiting finance or a decision to proceed on economic grounds. Revenue declined by 36.4% to £50.6million and profitability to £0.64million before finance costs and tax, a reduction of 27.3%. On the positive side, the contractual differences in the two problematical contracts at Halifax and Fiddlers Ferry were resolved satisfactorily during the year and this provided a significant cash inflow. The joint venture project at Minworth with Biwater Treatment Limited, for Severn Trent Water, also progressed very successfully during the year and provided a valuable contribution to the division's results. Opportunities outside of the water industry frameworks remained scarce, but the division successfully maintained its presence in its core power, waste, rail and industrial sectors.
The water industry remains a key focus and the attainment of the AMP5 framework for Severn Trent Water, for both infrastructure and non-infrastructure work, was a key element of the future growth strategy. To service this key client, a new operating division, NMC/Nomenca, has been formed by pooling resources from the Nomenca subsidiary and the civil engineering division. There is confidence that the forecasted expenditure levels will be achieved and this will provide a firm foundation of revenue in the future.
Highways
As with civil engineering, highways proved to be a very difficult market. Revenue fell by 24.0% to £10.2million, but a more efficient performance generated profitability increased by 50% to £0.21million before finance costs and tax. The division was particularly successful during the year in securing public sector contracts, along with a framework for Liverpool City Council. Unfortunately, the revenue from these contracts did not materialize during the year, but will be forthcoming in 2010. Several new clients were obtained during the year, including amongst others Lancashire County Council and Birmingham City Council. The strategy of geographical expansion is paying dividends and the ongoing order book is looking promising.
Utilities
Efficiency improvements and cost reductions enabled the division to deliver a significantly improved performance on a revenue reduced by 20.2% to £30.4million. Profitability increased from £0.4million to £1.4million, as expenditure on the main term contracts was maintained. The decline in revenue emanated from the substantial completion of the significant Fibrespeed project in North Wales and the delay in the commencement of the South Yorkshire Digital Contract valued at £31.0million. The division undertakes term contracts for most of the major companies in the telecommunications sector and in comparison to the remainder of the construction industry, expenditure has remained robust. These contracts, coupled with the South Yorkshire Digital contract, which is programmed for a further two years duration, provide a promising foundation for the future.
Building
The recession and the lack of finance for development severely affected the building subsidiary, with revenue declining by 66.4% to £9.9million and profitability by 80% to £0.15million. The marketing strategy was completely refocused to concentrate on the public sector and the results have been forthcoming. However, the impact will not materialize until 2010, for which the workload is promising. The division is working for a wider range of clients than previously, although the individual scale of the projects has diminished.
Nomenca
The mechanical and electrical subsidiary managed to reverse the market trend and increase revenue by 3.4% to £43.1million. Profitability, however, was reduced by 18.7% to £0.94million by the low margins prevailing. The foundation of the company's business is framework contracts and currently 11 No. have been secured within the water industry and 3 No. for Government Agencies. Over the next five years, excluding the Severn Trent framework, these should deliver revenue of approximately £130million. These, coupled with an improved performance from the investment in the regional office network, will provide growth in future years.
In these uncertain times, the maintenance of healthy cash flow is of paramount importance and the year end position demonstrated a turnaround of £9.7million to a positive balance of £6.2million, mainly as a result of contractual settlements. The Group continues to operate comfortably within its existing facilities.
The Group has set itself exacting targets for year on year improvement in both Health & Safety and Environmental performances. A "Just Culture" initiative of increasing individual accountability was introduced during the year and it is gratifying to report an overall reduction in accidents and improved environmental performance. The Health Surveillance Scheme was further expanded and an extra 200 No. employees were screened during the year. This improved performance was acknowledged by the receipt of 7 No. awards for Health & Safety performance and 1 No. Environmental award during the year. Corporate Social Responsibility (CSR) is a major area of concern for the Group and great progress has been made during the year. To consolidate its efforts, the Group became a member of the "Business in the Community" organization during the year.
The exceptional item for the potential OFT fine and associated costs has reduced earnings per share to 4.40 pence and the construction sector is still in the grips of a major recession. However, secured workload for the current financial year is circa £120million and the Group has several long term frameworks. These, coupled with the level of shareholders' funds, provide your Board, which is keen to maintain the yield, with the confidence to recommend a final dividend of 6.0 pence, making a total of 8.5 pence for the year.
R Moyle
Chairman
Consolidated statement of comprehensive income for the year ended 31 December 2009
|
|
Year Ended |
|
Year Ended |
|
|
31 December 2009 |
|
31 December 2008 |
|
|
£'000 |
|
£'000 |
|
Revenue |
144,185 |
|
202,215 |
|
Operating profit before exceptional items |
3,365 |
|
3,335 |
|
Exceptional items (Note 3) |
(1,594) |
|
- |
|
Operating profit |
1,771 |
|
3,335 |
|
Finance costs |
(217) |
|
(460) |
|
Profit before tax |
1,554 |
|
2,875 |
|
Tax |
(957) |
|
(841) |
|
Profit for the year |
597 |
|
2,034 |
|
Other comprehensive income |
- |
|
- |
|
Total comprehensive income for the year |
597 |
|
2,034 |
|
Attributable to:- |
|
|
|
|
Minority interest |
166 |
|
206 |
|
Equity holders of the Parent |
431 |
|
1,828 |
|
Earnings per share |
4.40p |
|
18.65p |
|
|
|
|
|
|
Amount of actual final dividend on ordinary shares proposed to the Shareholders on the register at the close of business on 30 April 2010, which will be paid on 28 May 2010. |
6.00p |
|
6.00p |
The calculation of earnings per share is based on 9,800,000 shares (2008 : 9,800,000) being the number of shares in issue throughout the period and on a profit of £431,000 (2008 : £1,828,000).
Consolidated statement of changes in equity
|
|
Year Ended 31 December 2009 |
Year Ended 31 December 2008 |
|||||
|
|
Total attributable to equity holders of the Parent £'000 |
|
Minority interest £'000 |
|
Total equity £'000 |
|
Total equity £'000 |
|
Balance at 31 December 2008 |
18,805 |
|
654 |
|
19,459 |
|
19,069 |
|
Comprehensive Income:- |
|
|
|
|
|
|
|
|
Profit for the year |
431 |
|
166 |
|
597 |
|
2,034 |
|
Other Comprehensive Income |
- |
|
- |
|
- |
|
- |
|
Total Comprehensive Income |
431 |
|
166 |
|
597 |
|
2,034 |
|
|
|
|
|
|
|
|
|
|
Dividends (Note 6) |
(833) |
|
(100) |
|
(933) |
|
(1,013) |
|
Purchase of Minority interest |
- |
|
- |
|
- |
|
(631) |
|
Balance at 31 December 2009 |
18,403 |
|
720 |
|
19,123 |
|
19,459 |
The total attributable to equity holders of the Parent is the aggregate of share capital, capital redemption reserve and retained earnings. Share capital of £980,000 and capital redemption reserve of £20,000 have not changed during the year ended 31 December 2009.
Consolidated balance sheet as at 31 December 2009
|
|
|
2009 £'000 |
|
2008 £'000 |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
|
9,714 |
|
11,014 |
|
Goodwill |
|
1,267 |
|
1,267 |
|
|
|
10,981 |
|
12,281 |
|
Current assets |
|
|
|
|
|
Inventories |
|
1,577 |
|
1,481 |
|
Construction contracts |
|
8,430 |
|
9,841 |
|
Trade and other receivables |
|
31,020 |
|
48,656 |
|
Cash and cash equivalents |
|
6,173 |
|
- |
|
|
|
47,200 |
|
59,978 |
|
Total assets |
|
58,181 |
|
72,259 |
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
Capital and reserves attributable to equity holders of the Parent |
|
|
|
|
|
Share capital |
|
980 |
|
980 |
|
Capital redemption reserve |
|
20 |
|
20 |
|
Retained earnings |
|
17,403 |
|
17,805 |
|
|
|
18,403 |
|
18,805 |
|
Minority interest |
|
720 |
|
654 |
|
Total equity |
|
19,123 |
|
19,459 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Obligations under finance leases |
|
|
|
|
|
- due after one year (secured) |
|
271 |
|
785 |
|
Provisions |
|
519 |
|
496 |
|
Deferred tax |
|
38 |
|
65 |
|
|
|
828 |
|
1,346 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
36,940 |
|
45,972 |
|
Current income tax payable |
|
621 |
|
900 |
|
Obligations under finance leases |
|
|
|
|
|
- due within one year (secured) |
|
669 |
|
1,018 |
|
Bank overdraft (secured) |
|
- |
|
3,564 |
|
|
|
38,230 |
|
51,454 |
|
Total liabilities |
|
39,058 |
|
52,800 |
|
Total equity and liabilities |
|
58,181 |
|
72,259 |
Consolidated cash flow for the year ended 31 December 2009
|
|
2009 £'000 |
|
2008 £'000 |
|
Cash flows from operating activities |
|
|
|
|
Operating profit |
1,771 |
|
3,335 |
|
Adjustment for:- |
|
|
|
|
Depreciation of property, plant and equipment |
1,633 |
|
1,860 |
|
Gain on disposal of property, plant and equipment |
(179) |
|
(144) |
|
Increase in reinstatement reserve |
23 |
|
67 |
|
Operating cash flows before movement in working capital |
3,248 |
|
5,118 |
|
(Increase)/decrease in inventories |
(96) |
|
233 |
|
Decrease in construction contracts |
1,411 |
|
9 |
|
Decrease/(increase) in receivables |
17,636 |
|
(4,124) |
|
(Decrease) in payables |
(9,032) |
|
(1,089) |
|
Cash generated from/(used in) operations |
13,167 |
|
147 |
|
Income Tax (paid) |
(1,265) |
|
(881) |
|
Interest paid |
(217) |
|
(460) |
|
Net cash generated from/(used in) operating activities |
11,685 |
|
(1,194) |
|
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
(246) |
|
(997) |
|
Proceeds on disposal of property, plant and equipment |
286 |
|
202 |
|
Purchase of minority |
- |
|
(1,792) |
|
Net cash generated from/(used in) investing activities |
40 |
|
(2,587) |
|
Cash flows from financing activities |
|
|
|
|
Equity dividends paid |
(833) |
|
(833) |
|
Dividends paid to minority interests |
(100) |
|
(180) |
|
Repayment of obligations under finance leases |
(1,055) |
|
(1,271) |
|
Net cash used in financing activities |
(1,988) |
|
(2,284) |
|
Net Increase/(decrease) in cash and cash equivalents |
9,737 |
|
(6,065) |
|
(Banks overdrafts)/cash and cash equivalents at 1 January 2009 |
(3,564) |
|
2,501 |
|
Cash and cash equivalents/(bank overdrafts) at 31 December 2009 |
6,173 |
|
(3,564) |
|
1. |
Basis of preparation |
|
|
The condensed Group financial statements for the year ended 31 December 2009 included in this report do not constitute the Group's statutory accounts for the year ended 31 December 2009, but are derived from those accounts. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation. |
|
|
|
|
|
The statutory accounts have been prepared on the basis of the accounting policies as set out in the previous annual financial statements, with the exception of the adoption of IAS1 Presentation of financial statements (revised). |
|
|
|
|
|
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS's), this announcement does not itself contain sufficient information to comply with IFRS's. |
|
|
|
|
|
The Group expects to publish full financial statements that comply with both IFRS's as adopted for use in the European Union and IFRS's as compliant with the Companies Act 2006 and Article 4 of the EU IAS Regulations. |
|
|
|
|
|
The condensed financial statements were approved by the Board on 7 April 2010. |
|
|
|
|
2. |
Segment reporting |
|
|
The business segment reporting format reflects the Group's management and internal reporting structure.
Business segments The group is comprised of the following business segments:-
- 'PLC' - comprising civil engineering, highways and utilities divisions - Building - construction of commercial and residential property - Nomenca - mechanical and electrical engineering products and services
Segment revenue and profit |
|
Year Ended 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Civil Engineering |
|
Highways |
|
Utilities |
|
Building |
|
Nomenca |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
50,575 |
|
10,195 |
|
30,417 |
|
9,885 |
|
43,113 |
|
144,185 |
|
Result before Corporate expenses |
3,292 |
|
959 |
|
2,915 |
|
1,604 |
|
3,570 |
|
12,340 |
|
Corporate expenses |
(2,651) |
|
(750) |
|
(1,492) |
|
(1,456) |
|
(2,626) |
|
(8,975) |
|
Operating profit before exceptional items |
641 |
|
209 |
|
1,423 |
|
148 |
|
944 |
|
3,365 |
|
Exceptional items (Note 3) |
|
|
|
|
|
|
|
|
|
|
(1,594) |
|
Operating profit |
|
|
|
|
|
|
|
|
|
|
1,771 |
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
(217) |
|
Profit before tax |
|
|
|
|
|
|
|
|
|
|
1,554 |
|
Tax |
|
|
|
|
|
|
|
|
|
|
(957) |
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
597 |
|
Year Ended 31 December 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Civil Engineering |
|
Highways |
|
Utilities |
|
Building |
|
Nomenca |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
External sales |
79,536 |
|
13,421 |
|
38,121 |
|
29,451 |
|
41,686 |
|
202,215 |
|
Result before Corporate expenses |
3,598 |
|
955 |
|
1,395 |
|
2,142 |
|
3,579 |
|
11,669 |
|
Corporate expenses |
(2,716) |
|
(816) |
|
(989) |
|
(1,395) |
|
(2,418) |
|
(8,334) |
|
Operating profit |
882 |
|
139 |
|
406 |
|
747 |
|
1,161 |
|
3,335 |
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
(460) |
|
Profit before tax |
|
|
|
|
|
|
|
|
|
|
2,875 |
|
Tax |
|
|
|
|
|
|
|
|
|
|
(841) |
|
Profit for the year |
|
|
|
|
|
|
|
|
|
|
2,034 |
|
Segment assets |
|
|
|
|
|
2009 |
|
2008 |
|
|
£'000 |
|
£'000 |
|
Civil Engineering |
20,254 |
|
30,564 |
|
Highways |
4,083 |
|
5,292 |
|
Utilities |
12,181 |
|
13,601 |
|
|
36,518 |
|
49,457 |
|
Building |
7,780 |
|
8,220 |
|
Nomenca |
13,883 |
|
14,582 |
|
Total segment assets and consolidated total assets |
58,181 |
|
72,259 |
|
|
|
|
|
|
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. Goodwill has been allocated to reportable segments to which it relates. 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 |
|
||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
|
Civil Engineering |
867 |
|
1,100 |
|
234 |
|
1,041 |
|
|
Highways |
175 |
|
190 |
|
47 |
|
180 |
|
|
Utilities |
522 |
|
490 |
|
141 |
|
464 |
|
|
Building |
41 |
|
54 |
|
14 |
|
12 |
|
|
Nomenca |
28 |
|
26 |
|
4 |
|
100 |
|
|
|
1,633 |
|
1,860 |
|
440 |
|
1,797 |
|
|
There were no impairment losses recognised in respect of property, plant and equipment or goodwill. |
|
|
|
All of the above relates to continuing operations and arose in the United Kingdom. |
|
|
|
Information about major customer Revenues of approximately £44,208,000 (2008 : £53,100,000) were derived from a single external customer. These revenues are attributable to the Civil Engineering and Nomenca segments. |
|
3. |
Exceptional item |
|||
|
|
The exceptional item relates to a fine levied by the Office of Fair Trading following their investigation into the construction industry. The Group strongly refute these allegations and after taking legal advice are appealing against the decision. |
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|
|
|||
|
4. |
Earnings per share |
|||
|
|
The basic and diluted earnings per share are the same and have been calculated on profits of £431,000 (2008 : £1,828,000) and 9,800,000 shares in issue. |
|||
|
|
|
|||
|
5. |
Taxation |
|||
|
|
In respect of the year ended 31 December 2009, corporation tax has been provided at 28% (2008 : 28.5%) of the taxable profit. |
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|
|
|
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|
6. |
Dividends |
|||
|
|
Amounts recognised as distributions to equity holders in the year:- |
|||
|
|
|
2009 |
|
2008 |
|
|
|
£'000 |
|
£'000 |
|
|
Final dividend for the year ended 31 December 2008 of 6p (2007 : 6p) per share |
588 |
|
588 |
|
|
Interim dividend for the year ended 31 December 2009 of 2.5p (2008 : 2.5p) per share |
245 |
|
245 |
|
|
|
833 |
|
833 |
|
|
|
|
|
|
|
|
The directors propose a final dividend of 6p per share (2008 : 6p per share), total £588,000 (2008 : £588,000). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. |
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|
7. |
Related parties and joint operations |
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|
The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers. |
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|
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|
|
Additionally, the Group has a 50% interest in a joint operation with Biwater Treatment Limited. |
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|
|
|
|||
|
|
The condensed Group financial statements for the year ended 31 December 2009 incorporate the following relating to the joint operation:- |
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|
|
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|
|
Year ended |
|
Year ended |
|
|
|
31 December 2009 |
|
31 December 2008 |
|
|
|
|
|
|
|
|
Revenue |
15,006 |
|
28,141 |
|
|
Expenses |
13,370 |
|
26,215 |
|
|
Assets |
2,648 |
|
5,631 |
|
|
Liabilities |
2,648 |
|
5,631 |
|
|
|
|
|
|
|
8. |
Contingent liabilities |
|||
|
|
Euler Hermes Guarantee plc, Lloyds TSB and HCC International Insurance Company Plc have given Performance Bonds to a value of £5,467,685 (2008 : £7,323,798) on the Group's behalf. These bonds have been made with recourse to the Group. |
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9. |
The Annual Report and Accounts for the year ended 31 December 2009 will be despatched to shareholders on 30 April 2010 and will be available on the Company's website - www.northmid.co.uk. |
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10. |
The Annual General Meeting will be held on Thursday 27 May 2010 at 12.00 noon at the Group's Head Office at Nunn Close, The County Estate, Huthwaite, Sutton-in-Ashfield, Nottinghamshire NG17 2HW. |
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Related Shares:
NMCN.L