20th Apr 2015 07:00
NORTH MIDLAND CONSTRUCTION PLC
FINAL RESULTS
North Midland Construction PLC ("the Company"), the UK provider of civil engineering, building, mechanical and electrical services to public and private organisations, announces its final results for the year ended 31 December 2014.
Highlights from the results:-
Year ended 31 December 2014 £'000 | Year ended 31 December 2013 £'000 | |
Revenue Operating loss Unadjusted loss before tax Adjusted profit before tax* Total comprehensive loss for the year Loss per share | 193,175 (2,846) (2,970) 4,353 (2,991) (29.47p) | 177,555 (5,855) (5,972) 3,791 (5,901) (58.14p) |
* Before charges relating to increased provisions on legacy contracts
For further information:-
Robert Moyle, Chairman - 01623 518812
Daniel Taylor, Finance Director - 01623 515008
· Revenue increased by 8.8% to £193.18 million.
· Underlying profitability excluding legacy contracts increased to £4.35 million.
· Operating loss in the year reduced from £5.86 million to £2.85 million.
· Losses of £6.22 million in the Building and Civil Engineering division due to unforeseen further delays and cost over-runs on two major problematical contracts. Progress has been made on the resolution on a number of the legacy contracts.
· Strong performance in the water businesses (NMCNomenca and Nomenca), with further combined increases in revenues and profitability.
· The E5 Joint Operation with three other framework contractors is circa 95% complete and the projected outturn remains encouraging.
· 85% of Group revenues derived from frameworks going forward.
· Secured workload for 2015 at circa £155 million.
· Cash position remains strong. Year-end balance of £5.3 million.
OPERATING AND FINANCIAL REVIEW
BUILDING & CIVIL ENGINEERING:-
The resolution of legacy contracts and further cost and time overruns on two major problematical contracts have contributed to further heavy losses being incurred in the B&CE division.
The loss for the year reduced by 34.9% to £6.22 million (2013 £9.55 million) after extra legacy costs and provisions of £6.82 million (2013 £9.69 million) on revenue reduced by 39.5% to £15.77 million (2013 £26.06 million).
The combined division has now been divided back into two separate entities for civil engineering and building, with the civil engineering division operating under the management of NMCNomenca. The building division is being managed by a newly recruited team. The underlying performance of both the civil and building elements was profitable and the new strategy adopted has been successful, with a high level of repeat business being secured with existing blue chip clients and a major student accommodation scheme in Leicester recently being awarded to the building division. The civils division continues to operate predominantly in the power and industrial sectors.
During the year several legacy contracts were resolved, but the three that remain have incurred further cost overruns, due to completion delays. Significant claims for losses incurred on these particular contracts are currently being pursued.
Recent contract awards contribute to management's optimism that the recovery in both divisions is now underway.
HIGHWAYS:-
Increased infrastructure spend has benefitted the highways division with revenue increasing by 94.8% to £24.97 million (2013 £12.82 million) with profitability climbing by 52.5% to £0.34 million (2013 £0.22 million).
The division has consolidated its position in the Midlands and the North and is now engaged on a controlled expansion into the South West with the recent award of a framework by Bristol City. On the back of recent performance clients are now considering the division for contracts of a higher notional value. The recent award of £10 million Leeds to Bradford Super Cycleway is an example.
The division has a current order book of £27 million for delivery this year and that will provide an excellent platform for further growth.
UTILITIES:-
Revenue in the utilities division increased by 11.2% to £21.92 million (2013 £19.71 million) but as a result of losses incurred on the BDUK broadband rollout projects for Carillion Telent, the division returned a loss of £0.75 million (2013 £0.22 million profit).
The BDUK schemes initially seemed to be a logical and attractive extension to the existing works programme, but the scope of works changed, and the decision was made to terminate the contract. This happened at the end of February 2015.
The division has recently resecured the Virgin Media frameworks for the North West and Yorkshire areas and continues to undertake frameworks for Electricity North West, KCom and City Fibre Holdings.
NMCNOMENCA:-
The division has had another exceptional year with profitability escalating by 17.1% to £2.89 million (2013 £2.46 million) on revenue increased by 9.2% to £86.91 million (2013 £79.62 million).
The division was engaged on AMP5 frameworks for Severn Trent, Anglian Water and other water related business. It is a member of the E5 consortium, which is engaged to deliver the £200 million programme of major projects for Severn Trent Water. The E5 programme will be completed in 2015. Work also commenced during the year on the £37.5 million project with Laing O'Rourke Imtech to construct a 137ml reinforced concrete storage reservoir at Ambergate in Derbyshire for Severn Trent.
As the results demonstrate, the division continues to deliver continued efficiencies and innovation for its clients and that faith has been repaid with the reappointment of NMCNomenca by Severn Trent Water to undertake, as a partner, its AMP6 programme. This will underpin the future growth of the division.
NOMENCA:-
The mechanical and electrical subsidiary continues to operate strongly with profitability rising 14.1% to £0.90 million (2013 £0.79 million) on a revenue increased by 10.8% to £43.61 million (2013 £39.35 million).
The subsidiary continues to grow from the foundations of its local office network and frameworks in the water and related sectors, such as for the Environment Agency. Nomenca, for example, has been recently engaged on flood alleviation works in the Somerset Levels after the previous problems experienced there. Work is currently emanating from twenty six different frameworks and 92% of revenue is framework generated. This year is the commencement of the AMP6 programme for the water companies and several key frameworks have already been secured.
However, several awards are still outstanding and the prospects for Nomenca to increase its market share of the AMP6 programme nationwide are extremely encouraging.
The design services capability continues to show good growth, along with the repair and maintenance capability. Both of these disciplines are seen as key drivers of growth for the future.
Nomenca has now grown to become a significant force in the supply of mechanical and electrical services to the water and water related industries. The prospects for further growth on the back of the AMP6 programme, which will involve a proportionally higher spend on mechanical and electrical works, are very promising.
DIVIDENDS
Due to the loss reported, the Directors do not recommend a final dividend for the year ended 31 December 2014 (2013: £nil).
FINANCING
The Group credit facilities continue to remain adequate for the foreseeable future and the Group has sufficient funds to support its growth going forward. At the year end the cash balance was £5.28 million (2013 £4.88 million).
OUTLOOK
The secured order book for the current financial year is circa £155 million and this represents a significant proportion of the 2015 budget. This level of secured revenue, along with the forecasted level of orders likely to be received under the existing frameworks, coupled with the underlying performance, is encouraging. The resolution of the few remaining legacy contracts still remains challenging, but progress is being made. This lends the Board to be cautiously optimistic for the future.
Group Statement of Comprehensive Income
Year Ended | Year Ended | ||
31 December 2014 | 31 December 2013 | ||
£'000 | £'000 | ||
Revenue | 193,175 | 177,555 | |
Operating loss | (2,846) | (5,855) | |
Interest received | 1 | 4 | |
Finance costs | (125) | (121) | |
Loss before tax | (2,970) | (5,972) | |
Tax | (21) | 71 | |
Loss for the year | (2,991) | (5,901) | |
Total comprehensive income for the year | (2,991) | (5,901) | |
Attributable to:- | |||
Equity holders of the Company | (2,991) | (5,901) | |
Loss per share (basic and diluted) | (29.47p) | (58.14p) |
Earnings per share, both basic and diluted, is calculated on the loss attributable to equity holders of the parent of £2,991,000 (2013: £5,901,000) and the weighted average of 10,150,000 (2013: 10,150,000) shares in issue during the year.
Group statement of changes in equity
Share Capital £'000 | Merger Reserve £'000 | Capital Redemption Reserve £'000 | Retained Earnings £'000 | Total £'000 | |
Balance at 1 January 2013 | 1,015 | 455 | 20 | 16,775 | 18,265 |
Loss and total comprehensive income for the year | - | - | - | (5,901) | (5,901) |
Dividends paid | - | - | - | (407) | (407) |
Balance at 31 December 2013 | 1,015 | 455 | 20 | 10,467 | 11,957 |
Loss and total comprehensive income for the year | - | - | - | (2,991) | (2,991) |
Balance at 31 December 2014 | 1,015 | 455 | 20 | 7,476 | 8,966 |
Group balance sheet as at 31 December 2014
| 2014
| 2013 restated | |
£'000 | £'000 | ||
Assets | |||
Non-current assets | |||
Property, plant and equipment | 11,141 | 10,984 | |
Investments in subsidiaries | - | - | |
Deferred tax asset | 82 | 103 | |
11,223 | 11,087 | ||
Current assets | |||
Inventories | 1,722 | 1,529 | |
Construction contracts | 12,838 | 12,989 | |
Trade and other receivables | 33,275 | 30,692 | |
Current income tax receivable | 13 | 33 | |
Cash and cash equivalents | 5,276 | 4,877 | |
53,124 | 50,120 | ||
Total assets | 64,347 | 61,207 | |
Equity and liabilities | |||
Capital and reserves attributable to equity holders of the Parent | |||
Share capital | 1,015 | 1,015 | |
Merger reserve | 455 | 455 | |
Capital redemption reserve | 20 | 20 | |
Retained earnings | 7,476 | 10,467 | |
Total equity | 8,966 | 11,957 | |
Liabilities | |||
Non-current liabilities | |||
Obligations under finance leases | 2,054 | 685 | |
Provisions | 329 | 242 | |
2,383 | 927 | ||
Current liabilities | |||
Trade and other payables | 51,453 | 47,557 | |
Obligations under finance leases | 1,545 | 766 | |
52,998 | 48,323 | ||
Total liabilities | 55,381 | 49,250 | |
Total equity and liabilities | 64,347 | 61,207 |
The prior year restatement is fully disclosed in note 10.
Group statement of cash flows for the year ended 31 December 2014
2014 | 2013 | |
£'000 | £'000 | |
Cash flows from operating activities | ||
Operating loss | (2,846) | (5,855) |
Adjustment for: | ||
Depreciation of property, plant and equipment | 1,689 | 1,711 |
Gain on disposal of property, plant and equipment | (31) | (30) |
Increase/(decrease) in reinstatement reserve | 87 | (108) |
Operating cash flows before movement in working capital | (1,101) | (4,282) |
Increase in inventories | (193) | (33) |
Decrease in construction contracts | 151 | 554 |
(Increase)/Decrease in receivables | (2,583) | 1,711 |
Increase in payables | 3,896 | 4,884 |
Cash generated from operations | 170 | 2,834 |
Income Tax received/(paid) | 20 | (103) |
Interest received | 1 | 4 |
Interest paid | (125) | (121) |
Net cash generated from operating activities | 66 | 2,614 |
Cash flows from investing activities | ||
Purchase of property, plant and equipment | (763) | (1,472) |
Proceeds on disposal of property, plant and equipment | 46 | 56 |
Net cash used in investing activities | (717) | (1,416) |
Cash flows from financing activities | ||
Equity dividends paid | - | (407) |
Net receipt/(repayment) of obligations under finance leases | 1,050 | (979) |
Net cash received from/(used in) financing activities | 1,050 | (1,386) |
Net increase / (decrease) in cash and cash equivalents | 399 | (188) |
Cash and cash equivalents at 1 January 2014 | 4,877 | 5,065 |
Cash and cash equivalents at 31 December 2014 | 5,276 | 4,877 |
Cash and cash equivalents comprise funds held at the bank which are immediately accessible.
1. | Basis of preparation |
The condensed Group financial statements for the year ended 31 December 2014 included in this report do not constitute the Group's statutory accounts for the year ended 31 December 2014 are derived from those accounts. The auditor has 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.
| |
While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. | |
The condensed Group financial statements have been prepared on a basis consistent with that adopted in the previous year's published financial statements and in accordance with IFRSs. | |
The Group expects to publish statutory financial statements for the year ended 31 December 2014 that comply with both IFRSs as adopted for use in the European Union and IFRSs as compliant with the Companies Act 2006 and Article 4 of the EU IAS Regulations based on the information presented in this announcement. | |
The condensed financial statements were approved by the Board on 17 April 2015. | |
Audited statutory accounts for the year ended 31 December 2013 have been delivered to the registrar of companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2013 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. | |
2. | Segment reporting |
The business segment reporting format reflects the Group's management and internal reporting structure.
The group is comprised of the following business segments:-
- 'PLC' - comprising building and civil engineering, highways, utilities and NMCNomenca divisions - Nomenca - mechanical and electrical engineering products and services |
Segment revenue and profit
Year ended 31 December 2014
Building | Highways | NMCNomenca | Nomenca | Utilities | Total | |
& Civil | ||||||
Engineering | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | ||||||
External sales | 15,772 | 24,970 | 86,905 | 43,608 | 21,920 | 193,175 |
Result before corporate expenses | (5,901) | 1,071 | 5,859 | 4,165 | (203) | 4,991 |
Corporate expenses | (317) | (734) | (2,974) | (3,265) | (547) | (7,837) |
Operating profit/(loss) | (6,218) | 337 | 2,885 | 900 | (750) | (2,846) |
Net finance costs | (124) | |||||
Loss before tax | (2,970) | |||||
Tax | (21) | |||||
Loss for the year | (2,991) |
Year ended 31 December 2013
Building | Highways | NMCNomenca | Nomenca | Utilities | Total | |
& Civil | ||||||
Engineering | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | ||||||
External sales | 26,064 | 12,816 | 79,620 | 39,346 | 19,709 | 177,555 |
Result before corporate expenses | (9,266) | 465 | 5,518 | 2,624 | 681 | 22 |
Corporate expenses | (282) | (244) | (3,055) | (1,835) | (461) | (5,877) |
Operating profit/(loss) | (9,548) | 221 | 2,463 | 789 | 220 | (5,855) |
Net finance costs | (117) | |||||
Loss before tax | (5,972) | |||||
Tax | 71 | |||||
Loss for the year | (5,901) |
Segment assets
2014
£'000 | 2013 restated £'000 | |
Building and Civil Engineering | 11,331 | 16,985 |
Highways | 7,352 | 4,633 |
Utilities | 16,550 | 14,145 |
NMCNomenca | 10,839 | 8,491 |
Nomenca | 18,275 | 16,953 |
Total segment assets and consolidated total assets | 64,347 | 61,207 |
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 amortisation | Additions to non-current assets | ||
2014 £'000 | 2013 £'000 | 2014 £'000 | 2013 £'000 | |
Building and Civil Engineering | 197 | 323 | 218 | 396 |
Highways | 278 | 159 | 307 | 195 |
Utilities | 243 | 244 | 269 | 299 |
NMCNomenca | 966 | 967 | 1,067 | 1,209 |
Nomenca | 5 | 18 | - | - |
Total | 1,689 | 1,711 | 1,861 | 2,099 |
| 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.
The results of each segment are not materially affected by seasonality.
| ||||||
3. |
Information about major customer
Revenues of approximately £79,300,000 (2013: £68,800,000) were derived from a single external customer. These revenues are attributable to the NMCNomenca and Nomenca segments.
| ||||||
4. | Earnings per share | ||||||
Earnings per share, both basic and diluted, is calculated on the loss attributable to equity holders of the parent of £2,991,000 (2013: £5,901,000) and the weighted average of 10,150,000 (2013: 10,150,000) shares in issue during the year. | |||||||
5. | Taxation | ||||||
In respect of the year ended 31 December 2014, as a result of the pre-tax losses no corporation tax is payable (2013: none). The tax charge in the period arises from a deferred tax asset attributable to short term timing differences. There are trading losses carried forward of £8,380,000 (2013: £5,686,000), a deferred tax asset relating to the losses has not been recognised. | |||||||
6. | Dividends | ||||||
Amounts recognised as distributions to equity holders in the year:- | |||||||
2014 | 2013 | ||||||
£'000 | £'000 | ||||||
Final dividend for the year ended 31 December 2013 of 0p (2012: 3.0p) per share | - | 305 | |||||
Interim dividend for the year ended 31 December 2014 of 0p (2013: 1.0p) per share | - | 102 | |||||
| - | 407 | |||||
7. | Related parties and joint operations | ||||||
The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers. The only transactions with these individuals comprise remuneration under service contracts. | |||||||
Additionally, the Group has the following interests in joint operations;
The E5 Joint Venture - (Waste Water Major Projects, Coventry UK) 25% interest in a joint operation with MWH Treatment Limited, Mott MacDonald Bentley Limited and Costain Limited.
Ambergate Working Alliance - (Construction of reinforced concrete covered storage reservoir, Ambergate UK) 50% interest in a joint operation with Laing O'Rourke Imtech.
All joint operation activities are strategic to the company and its operating division NMCNomenca. | |||||||
The condensed Group financial statements for the year ended 31 December 2014 incorporate the following relating to the joint operations:- | |||||||
Year ended | Year ended | ||||||
31 December 2014 | 31 December 2013 | ||||||
£'000 | £'000 | ||||||
Revenue | 13,609 | 17,500 | |||||
Expenses | 12,108 | 16,243 | |||||
Assets | 375 | 937 | |||||
Liabilities | 375 | 937 | |||||
8. | Share capital | ||||||
2014 | 2013 | ||||||
£'000 | £'000 | ||||||
Authorised:- | |||||||
12,500,000 ordinary shares of 10p each | 1,250 | 1,250 | |||||
Allotted, issued and fully paid:- | |||||||
10,150,000 (2013 - 10,150,000) ordinary shares of 10p | 1,015 | 1,015 | |||||
9. | Contingent liabilities | ||||||
Aviva Insurance Limited, Lloyds Bank PLC, Euler Hermes Europe S.A. (N.V.) and HCC International Insurance Company Plc have given Performance Bonds to a value of £4,726,472 (2013: £4,533,973) on the Group's behalf. These bonds have been made with recourse to the Group.
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10. | Prior year restatement In the current year the directors have carried out a review of certain balances held in construction contracts. As a consequence of this exercise the classification of certain balances has been amended. Accordingly the comparative receivable balance for construction contracts has decreased by £3,225,000 and the trade and other payables balances has decreased by the same amount compared to corresponding figures in the Annual Report and Accounts for the year ended 31 December 2013. The reclassification did not affect the operating result nor total comprehensive in the prior year and as a consequence no third balance sheet has been presented. | ||||||
11. | The Annual Report and Accounts for the year ended 31 December 2014 will be despatched to shareholders on or around 22 April 2015 and will be available on the Company's website - www.northmid.co.uk. | ||||||
12. | The Annual General Meeting will be held on Thursday 21 May 2015 at 12.00 noon at the Group's Head Office at Nunn Close, The County Estate, Huthwaite, Sutton-in-Ashfield, Nottinghamshire NG17 2HW. | ||||||
Related Shares:
NMCN.L