6th Aug 2020 07:00
6 August 2020
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).
NMCN PLC
HALF YEAR REPORT
nmcn PLC ("the Company" or "the Group" or "nmcn"), a leading engineering and construction company, delivering major water, built environment and critical national infrastructure projects, announces its unaudited interim results for the six months ended 30 June 2020.
Highlights
|
|
| Six Months Ended |
| Six Months Ended |
| Period Movement |
|
|
| 30 June 2020 |
| 30 June 2019 |
|
|
|
|
| £'000 |
| £'000 |
| % |
|
|
|
|
|
|
|
|
Revenue |
|
| 181,626 |
| 183,978 |
| (1.3) |
|
|
|
|
|
|
|
|
Profit Before Tax |
|
| 809 |
| 3,463 |
| (76.6) |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
| 15,819 |
| 25,785 |
| (38.7) |
|
|
|
|
|
|
|
|
Earnings per Share |
|
| 6.5p |
| 27.0p |
| (75.9) |
|
|
|
|
|
|
|
|
Proposed Dividends |
|
| 10.0p |
| 9.0p |
| 11.1 |
o Revenue decreased by 1.3% compared with H1 2019
o Profit before tax decreased to £0.8 million (H1 2019: £3.5 million)
o Cash of £15.8 million at period end; a decrease on prior year
o Current order book for completion in 2020 of circa £350 million (H1 2019: circa £356 million)
o Interim dividend of 10.0p per share (H1 2019: 9.0p)
Period Performance
o Good start to 2020, prior to the COVID-19 pandemic, and operational challenges in Q2
o Q1 revenue increased by 3.7% to £97.9 million and pre-tax profit was up by 5.9% to £1.8 million
o During Q2, site shut-downs, productivity constraints, changes in working methodology, and prolongation of contracts in addition to operational completion challenges on a major infrastructure scheme resulted in a pre-tax loss for the quarter of £1.0m (Q2 2019: £1.8 million profit)
Outlook
o All of our sites are now fully active and working at COVID-19 compliant production capacity
o Slippage on schemes starting in some of the business units, however current order book stands at 93% of expected full year revenues
o Blended net margins, due to COVID-19, the AMP transition and completion of major infrastructure schemes, are anticipated to be circa 0.5% for FY 2020
o Swift and decisive reduction in fixed costs at the outset of lockdown has led to a revised cost base in the short term
o Indications of a new normal being established during H1 2021, and the Group returning to margins at industry norms
John Homer - Chief Executive - commented:
"The first half of 2020 comprised two very different quarterly trading periods. We started the year well, with the financial results reflecting an encouraging order book and the benefit of a number of our initiatives. In the second quarter we faced the immediate challenges of COVID-19 with the suspension of projects and the disruptive impact of new operating requirements and these were compounded by some other operational issues. In overall terms, I am delighted to be reporting a profitable result for the period which we believe further demonstrates the value of our business model and dedication and capabilities of our teams.
We have sought to protect the health and wellbeing of all our stakeholders and I am deeply proud of the manner in which our entire staff has responded to the challenges of maintaining activity in critical areas and re-launching projects that have been suspended. This is a strong demonstration of our people as an overarching differentiator.
In the longer term, the attractions and opportunities of our addressable markets remain. In the near-term, we are likely to continue to endure the constraints of a coronavirus environment but with a healthy order book and strong fundamental growth drivers and opportunities within our addressable markets, we believe the business will continue to progress."
For further information: |
|
|
John Homer, Chief Executive Daniel Taylor, Chief Financial Officer 01623 515008 nmcn PLC
|
| |
OUR OPERATING AND FINANCIAL REVIEW
Group Financial Performance
Revenue for the period is broadly similar to the comparable period last year at £181.6 million against £184.0 million. Profit before tax totalled £0.8 million compared to £3.5 million for the same period in 2019. The performance was impacted by the considerable challenges faced by the Group in relation to the operational completion of a major infrastructure scheme, the AMP transition in its Water segment and the overall impact of the COVID-19 pandemic.
The Group had made a good start to 2020, prior to the COVID-19 pandemic. We entered the current year with good momentum and promising market opportunities and in the first quarter, revenue increased by 3.7% to £97.9 million and pre-tax profit was up by 5.9% to £1.8 million. The Built Environment segment generated profits of £0.2 million (Q1 2019: £0.2 million); the main driver being the ongoing improving performance of the Telecoms business unit into 2020. The Water business also continued to perform strongly despite a reduction in revenue for many of the segment's customers due to the AMP transition year, as well as operational challenges on completion of the major infrastructure schemes. The Water segment's Q1 revenues were down by 4.7% to £66.9 million (Q1 2019: £70.2 million), but despite this, profitability increased to £1.6 million (Q1 2019: £1.5 million).
Over the balance of the first half, however, we had to adjust to the rapidly evolving challenges of COVID-19 and our response sought to balance self-help with Government initiatives in a holistic and fair manner. The second quarter saw site shut downs, productivity restrictions, changes in working methodology, and the prolongation of contracts, as a result of the pandemic, in addition to operational completion challenges on a major infrastructure scheme. This resulted in turnover reducing by 14.6% from £97.9 million to £83.7 million quarter-on-quarter with a loss for the quarter of £1.0 million.
In response to the COVID-19 situation we have taken all appropriate steps to protect the health and wellbeing of our staff, customers, and suppliers and to comply fully with Government requirements and guidance as our highest priority. We remain positively engaged with Business in the Community (BITC), progressing charitable work with those in need. The positioning of the business to emerge from this period in the strongest possible condition, has been guided by our Positive Impactive Plan (our ESG policies) and we have continued to remain a responsible member of the communities in which we operate.
The current order book stands at 93% of expected revenues for the year with all business units now fully operational and we have recommenced site activities, working at COVID-19 compliant production capacity. The impact of this on our margins has been significant, and will continue to be so for the remainder of this year, due to several factors, including; margin deterioration from demobilisation of resources and remobilisation delays, reduction in operational productivity due to revised operating procedures, prolongation of current schemes, and the additional direct costs associated with COVID-19.
The Board anticipates that margins for the full year 2020, due to COVID-19, the AMP transition, and completion of major infrastructure schemes will be circa 0.5%. In the medium-term, it anticipates returning to a sustainable growth rate with the focus being back on quality of earnings and margin enhancements.
Built Environment Segment
|
|
|
|
| Six Months Ended 30 June 2020 | Six Months Ended 30 June 2019 | Period Movement |
| £'000 | £'000 | % |
Revenue |
61,784 |
51,874 |
19.1 |
|
|
|
|
Operating (loss)/profit | (5) | 588 | (100.9) |
|
|
|
|
Operating profit margin | 0.0% | 1.1% |
|
|
|
|
|
Secured workload | 142,000 | 118,000 | 20.3 |
The Built Environment segment has seen a significant growth in revenue in the period from £51.9 million in the prior year to £61.8 million, an increase of 19.1%. This growth is in line with our strategy to create a better balance between the two segments. This revenue growth in the segment was despite the challenges of the COVID-19 but they did adversely impact on profitability resulting in a small operating loss in the first half of the year.
The Telecoms business unit continued to perform well in the first half of 2020. The business unit has achieved an operating profit of £0.7 million, up by £0.2 million on the same period in the prior year. Further growth is expected in super-fast broadband over the next few years, and the business unit is well placed to take advantage of the right opportunities. During this year the business unit has secured the Virgin Media Morpheus frameworks in two operating regions and further works for British Telecom.
The newly established Power & Industrial business unit has seen delays to the start of projects resulting in insufficient returns to cover its fixed overhead, however with the orders received in the first half of the year we are anticipating this reversing with a small contribution being achieved for the full year.
Across the Highways and Building business units, the impact of the severe weather during the first quarter along with the initial impact of COVID-19 in March, particularly on the Building business unit, has meant a negative contribution for the first half of the year. The Building business unit has a solid order book in its targeted markets as well as a number of large potential schemes in the pipeline, where we are working on early design stages with customers and where orders are anticipated in the second half of the year for 2021 and beyond.
The Highways business unit had a disappointing first half year, largely due to operational issues. However, prospects for the remainder of the year are more encouraging. Work is due to commence on the junction improvements to the M621, a contract of circa £28 million, later in the year as part of the Regional Development Partnership by Highways England. In addition, it has secured preferred bidder status on a number of local authority road improvements schemes to commence later this year and add to the opening order book for 2021.
All of the self-funded residential developments, within nmcn Investments, are due for completion this year. Sales expectations for this year are modest with the anticipation that most sales will be achieved in early 2021. The current investment in these schemes amounts to £17.8 million (H1 2019: £14.1 million) and no further projects will be progressed until the Board is confident of the returns from the current schemes under construction.
The secured order book for the Built Environment segment to construct in 2020 is £142 million (H1 2019: £118 million), an increase from the comparable period of 20.3%.
Water Segment
|
|
|
|
| Six Months Ended 30 June 2020 | Six Months Ended 30 June 2019 | Period Movement |
| £'000 | £'000 | % |
Revenue |
119,842 |
132,104 |
(9.3) |
|
|
|
|
Operating profit | 1,067 | 2,953 | (63.9) |
|
|
|
|
Operating profit margin | 0.89% | 2.2% |
|
|
|
|
|
Secured workload | 208,000 | 238,000 | (12.6) |
As anticipated, the AMP transition year has resulted in a reduction in revenue for the Water segment in the period from £132.1 million to £119.8 million, a decrease of 9.3%. Operating margins were impacted by operational challenges on the completion of a major infrastructure scheme, and to a lesser extent the AMP transition period, and the effect of the COVID-19 pandemic. These resulted in the Water segment producing a reduced operating profit of £1.1 million, down from £3.0 million in the previous year.
During the period, and as previously reported, the Water segment has been successful in securing the following strategic frameworks; Anglian Water (Chemical Dosing), the Coal Authority and a number of frameworks in asset security works for public sector bodies.
The secured order book of circa £208 million for the Water segment at the half year stage is a significant but expected decrease of 12.6% on the previous period (H1 2019: £238 million), in line with our strategy to achieve a balance of revenue between the operating segments. The Board continues to be cautious around any potential delays in workload through the AMP transition which may impact the remainder of the period, along with the ongoing operational impact of the COVID-19 pandemic as previously highlighted.
Continued focus on FALM (Full Asset Lifecycle Management) is proving to be successful with investment into the digital transformation of our products and services. This has resulted in further orders for our products and technical services offering. We also achieved external recognition of our success by being awarded as Water Industry Contractor of the Year at the Water Industry Awards for the third year running.
Legacy
In relation to the one remaining legacy contract with Cyden Homes Limited, the Group is pursuing claims with the client for sums greater than the carrying value and will continue to do so until the situation is resolved. This long running dispute continues to be progressed through the court system.
Cash
The Group's cash position at 30 June 2020 was £15.8 million (30 June 2019: £25.8 million). As outlined in the 2019 full year results and the recent trading update, there has been a reduction in cash levels from the previous year due to a combination of revenue growth (increasing working capital requirements), the mix of contracts and customer payment terms and further expenditure on nmcn Investments, which will run until the end of 2020. Cash management remains a key focus, and we continued to utilise the Group's debt facilities throughout much of the period. The Board is pleased that cash preservation measures during the lockdown period were effective, and these will continue to be utilised and developed further throughout the year. The Company is currently seeking to secure a committed revolving credit facility.
Dividends
In light of some increasing visibility on the impact of the COVID-19 pandemic and noting the critical nature of the Group's addressable market, and the positive expected outturn for 2020, the Board has declared an interim dividend of 10.0p per share (H1 2019: 9.0p). This is attributable to not having proposed a final dividend for FY 2019 as part of the cash preservation measures at the start of the COVID-19 pandemic.
The dividend will be paid on 11 September 2020 to shareholders on the register at 14 August 2020.
Outlook
The current order book for completion in the full year 2020 is circa £350 million (2019: circa £356 million). This gives the Board confidence that its expectations will be achieved, with net margins due to COVID-19, the AMP transition and operational challenges on major infrastructure schemes expected at circa 0.5%. The Group's strong reputation for operational delivery, its balance sheet, cash management and positive brand mean it is well placed to manage further headwind challenges.
Longer term, our chosen markets remain attractive propositions, in particular Water, Roads and Telecommunications, as priority targets for Government investment due to urgent national needs.
In Water, the value of the latest five-year Asset Management Programme, AMP7, agreed between the regulator, OFWAT, and the water companies is valued at £51 billion. This reflects a 16% increase in real terms over the AMP6 investment period which ended in March 2020. A major aim of the AMP programmes is to reduce leakage, amounting to an estimated 20% of supply, and increase security of supply.
Road building and improvements were key pledges in the most recent Conservative Party manifesto. In the March 2020 Budget, the Government committed to spend £27.4 billion on the strategic road network in England and annual expenditure is expected to grow steadily, peaking in 2023-4.
Last year's Conservative manifesto also pledged £5 billion in funding to roll out the broadband network and improve mobile phone coverage across the country by 2025. The growing strength of our Telecoms business unit positions us favourably.
Housing is also a priority for the Government, which reopened the residential market in mid-May and introduced a Stamp Duty holiday in the Budget, whilst institutional investor demand for both student housing and build-to-rent (BTR) continues to be strong, albeit with some shorter-term constraints.
Given its operational focus the Group is well placed to be involved in the delivery of such public expenditure pledges as well as the additional opportunities that prevail due to the well-publicised circumstances of the UK construction sector.
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
The unaudited condensed Group results for the half year ended 30 June 2020 are shown below together with the unaudited Group results for the half year ended 30 June 2019 and the audited Group results for the year ended 31 December 2019.
| Six Months Ended 30 June | Year Ended | |||
| 2020 |
| 2019 |
| 31 December 2019 |
| £'000 |
| £'000 |
| £'000 |
|
|
|
|
|
|
Revenue | 181,626 |
| 183,978 |
| 404,658 |
Other operating income | 526 |
| 610 |
| 1,190 |
| 182,152 |
| 184,588 |
| 405,848 |
|
|
|
|
|
|
Share of profit of joint ventures | 4 |
| - |
| - |
Raw materials and consumables | (27,794) |
| (28,848) |
| (71,821) |
Other external charges | (103,524) |
| (104,176) |
| (229,277) |
Employee costs | (42,457) |
| (41,946) |
| (84,867) |
Amortisation of intangible assets | (45) |
| - |
| (43) |
Depreciation of property, plant and equipment | (2,899) |
| (2,611) |
| (5,475) |
Other operating charges | (4,375) |
| (3,466) |
| (6,695) |
Operating profit | 1,062 |
| 3,541 |
| 7,670 |
Finance income | - |
| 37 |
| 49 |
Finance costs | (253) |
| (115) |
| (278) |
Profit before tax | 809 |
| 3,463 |
| 7,441 |
Tax (Note 7) | (132) |
| (705) |
| (1,529) |
Profit for the period | 677 |
| 2,758 |
| 5,912 |
Other comprehensive income | - |
| - |
| - |
Total comprehensive income for the period | 677 |
| 2,758 |
| 5,912 |
Attributed to: - |
|
|
|
|
|
Equity holders of the parent | 677 |
| 2,758 |
| 5,912 |
| 677 |
| 2,758 |
| 5,912 |
Basic earnings per share (Note 6) | 6.5p |
| 27.0p |
| 57.4p |
Diluted earnings per share (Note 6) | 6.3p |
| 26.3p |
| 55.9p |
Dividend per share (Note 8) | 10.0p |
| 9.0p |
| 9.0p |
|
|
|
|
|
|
UNAUDITED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
| Share | Merger | Treasury Share | Share-Based Payment | Capital Redemption | Retained |
|
| Capital | Reserve | Reserve | Reserve | Reserve | Earnings | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 January 2019 | 1,015 | 455 | - | 1,450 | 20 | 15,229 | 18,169 |
Profit and total comprehensive income for the period | - | - | - | - | - | 2,758 | 2,758 |
Shares issued on exercise of share options | 29 | - | - | 948 | - | (977) | - |
Tax settlement of share options | - | - | - | (1,644) | - | - | (1,644) |
Treasury shares repurchased | - | - | (164) | - | - | - | (164) |
Share-based payment expense | - | - | - | 521 | - | - | 521 |
Share-based payment expense - deferred tax | - | - | - | (236) | - | - | (236) |
Dividends paid | - | - | - | - | - | (1,214) | (1,214) |
Balance at 30 June 2019 | 1,044 | 455 | (164) | 1,039 | 20 | 15,796 | 18,190 |
Profit and total comprehensive income for the period | - | - | - | - | - | 3,154 | 3,154 |
Treasury shares repurchased | - | - | (56) | - | - | - | (56) |
Share-based payment expense | - | - | - | 345 | - | - | 345 |
Share-based payment expense - current tax | - | - | - | 282 | - | - | 282 |
Share-based payment expense - deferred tax | - | - | - | (32) | - | - | (32) |
Dividends paid | - | - | - | - | - | (937) | (937) |
Balance at 31 December 2019 | 1,044 | 455 | (220) | 1,634 | 20 | 18,013 | 20,946 |
Profit and total comprehensive income for the period | - | - | - | - | - | 677 | 677 |
Share-based payment expense | - | - | - | (502) | - | - | (502) |
Share-based payment expense - deferred tax | - | - | - | (79) | - | - | (79) |
Balance at 30 June 2020 | 1,044 | 455 | (220) | 1,053 | 20 | 18,690 | 21,042 |
UNAUDITED CONDENSED GROUP BALANCE SHEETS
The unaudited condensed Group balance sheets as at 30 June 2020 and 30 June 2019 (restated) are shown below together with the audited Group balance sheet as at 31 December 2019.
|
|
| 30 June | 31 December | ||||
|
|
| 2020 |
| 2019 |
| 2019 | |
|
|
| £'000 |
| £'000 |
| £'000 | |
Assets |
|
|
| Restated1 |
|
| ||
Non-current assets |
|
|
|
|
|
| ||
| Intangible assets |
| 2,227 |
| - |
| 2,272 | |
| Property, plant and equipment |
| 30,265 |
| 25,710 |
| 28,775 | |
| Deferred tax asset |
| 414 |
| 739 |
| 625 | |
|
|
| 32,906 |
| 26,449 |
| 31,672 | |
Current assets |
|
|
|
|
|
| ||
| Inventories |
| 1,861 |
| 1,855 |
| 1,805 | |
| Trade and other receivables |
| 75,354 |
| 66,929 |
| 81,201 | |
| Current income tax receivable |
| 349 |
| - |
| - | |
| Cash and cash equivalents |
| 15,819 |
| 25,785 |
| 25,814 | |
|
|
| 93,383 |
| 94,569 |
| 108,820 | |
|
|
|
|
|
|
| ||
Total assets |
| 126,289 |
| 121,018 |
| 140,492 | ||
|
|
|
|
|
|
|
| |
Equity and liabilities |
|
|
|
|
|
| ||
Capital and reserves attributable to equity holders of the Parent |
|
|
|
|
|
| ||
| Share capital |
| 1,044 |
| 1,044 |
| 1,044 | |
| Merger reserve |
| 455 |
| 455 |
| 455 | |
| Treasury share reserve |
| (220) |
| (164) |
| (220) | |
| Share-based payment reserve |
| 1,053 |
| 1,039 |
| 1,634 | |
| Capital redemption reserve |
| 20 |
| 20 |
| 20 | |
| Retained earnings |
| 18,690 |
| 15,796 |
| 18,013 | |
Total equity |
| 21,042 |
| 18,190 |
| 20,946 | ||
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Non-current liabilities |
|
|
|
|
|
| ||
| Trade and other payables |
| 7,548 |
| 3,218 |
| 6,709 | |
| Obligations under leases |
| 3,396 |
| 2,901 |
| 3,677 | |
| Provisions |
| 303 |
| 338 |
| 313 | |
|
| 11,247 |
| 6,457 |
| 10,699 | ||
Current liabilities |
|
|
|
|
|
| ||
| Trade and other payables |
| 92,764 |
| 94,575 |
| 107,653 | |
| Current income tax payable |
| - |
| 810 |
| 22 | |
| Obligations under leases |
| 1,236 |
| 986 |
| 1,172 | |
|
|
| 94,000 |
| 96,371 |
| 108,847 | |
|
|
|
|
|
|
| ||
Total liabilities |
| 105,247 |
| 102,828 |
| 119,546 | ||
|
|
|
|
|
|
| ||
Total equity and liabilities |
| 126,289 |
| 121,018 |
| 140,492 | ||
1 After restatement as described in note 3.
UNAUDITED CONDENSED GROUP STATEMENTS OF CASH FLOWS
The unaudited condensed Group statements of cash flows for the periods ended 30 June 2020 and 30 June 2019 (restated) are shown below together with the audited Group statement of cash flows for the year ended 31 December 2019.
|
| Six Months Ended 30 June |
| Year Ended | ||
|
| 2020 |
| 2019 |
| 31 December 2019 |
|
| £'000 |
| £'000 |
| £'000 |
|
|
|
| Restated1 |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Operating profit |
| 1,062 |
| 3,541 |
| 7,670 |
Adjustments for: |
|
|
|
|
|
|
Amortisation of intangible assets |
| 45 |
| - |
| 43 |
Depreciation of property, plant and equipment |
| 2,899 |
| 2,611 |
| 5,475 |
Gain on disposal of property, plant and equipment |
| (214) |
| (203) |
| (410) |
Share-based payment (credit)/expense |
| (502) |
| 521 |
| 866 |
Operating cash flows before movements in working capital |
| 3,290 |
| 6,470 |
| 13,644 |
|
|
|
|
|
|
|
(Increase)/decrease in inventories |
| (56) |
| (64) |
| 59 |
Decrease/(increase) in receivables |
| 7,139 |
| (1,747) |
| (11,392) |
Increase in amounts owed by joint ventures |
| (1,292) |
| (4,368) |
| (5,830) |
Decrease in reinstatement provision |
| (10) |
| (11) |
| (37) |
(Decrease)/increase in payables |
| (14,614) |
| (3,370) |
| 4,285 |
Cash (used in)/generated from operations |
| (5,543) |
| (3,090) |
| 729 |
|
|
|
|
|
|
|
Income tax paid |
| (293) |
| (129) |
| (1,133) |
Net cash (used in)/generated from operations |
| (5,836) |
| (3,219) |
| (404) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Purchase of property, plant and equipment | (2,454) |
| (1,438) |
| (3,072) | |
Proceeds on disposal of property, plant and equipment | 437 |
| 532 |
| 1,062 | |
Cash acquired through purchase of subsidiary | - |
| - |
| 842 | |
Interest received | - |
| 37 |
| 49 | |
Net cash used in investing activities |
| (2,017) |
| (869) |
| (1,119) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Equity dividends paid |
| - |
| (1,214) |
| (2,151) |
Treasury shares repurchased |
| - |
| (164) |
| (220) |
Proceeds from exercise of share options |
| - |
| 29 |
| 29 |
Repayments of obligations under leases |
| (794) |
| (495) |
| (1,272) |
Repayments of obligations under financing arrangements |
| (1,164) |
| (1,521) |
| (3,583) |
Proceeds from financing arrangements |
| - |
| - |
| 1,459 |
Interest payable under leases |
| (91) |
| (58) |
| (132) |
Interest payable under financing arrangements |
| (32) |
| (57) |
| (139) |
Interest paid |
| (61) |
| - |
| (7) |
Net cash used in financing activities |
| (2,142) |
| (3,480) |
| (6,016) |
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents | (9,995) |
| (7,568) |
| (7,539) | |
Cash and cash equivalents at start of period |
| 25,814 |
| 33,353 |
| 33,353 |
Cash and cash equivalents at end of period |
| 15,819 |
| 25,785 |
| 25,814 |
1 After restatement as described in note 3.
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. 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 2019. The comparative figures for the year ended 31 December 2019 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. |
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2. | Use of judgements and estimates |
| 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 2019. 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 2019. |
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3. | Changes in significant accounting policies and other restatements |
| The accounting policies adopted in the preparation of the unaudited condensed Group half-yearly financial statements to 30 June 2020 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2019. The Group has considered amendments to existing standards and interpretations that are effective for the year ending 31 December 2019 and is of the view that they have no impact on the unaudited condensed Group half-yearly accounts. Subsequent to the release of its half-yearly financial statements to 30 June 2019, the Group has reclassified its hire purchase arrangements as financing arrangements within the scope of IFRS 9 Financial Instruments. These arrangements had previously been classified as leases within the scope of IFRS 16 Leases. This reclassification has resulted in a reduction to the previously reported obligations under leases balance as at 30 June 2019 of £6,349,000, with a corresponding increase in the current and non-current trade and other payables balances. There was no impact on reported profit for the period ended 30 June 2019 as a result of the reclassification. The Group's hire purchase arrangements were classified as financing arrangements in the consolidated financial statements as at and for the year ended 31 December 2019.
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4. | Segment reporting |
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| The Board reviews the Group's operational performance via two segments: The Water segment and the Built Environment segment. Segment revenue and profit |
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| Six Months Ended 30 June 2020 | ||||
| Built Environment |
| Water |
| Total | |
| £'000 |
| £'000 |
| £'000 | |
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| |
Revenue | 61,784 |
| 119,842 |
| 181,626 | |
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Result before corporate expenses | 4,348 |
| 9,372 |
| 13,720 | |
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Corporate expenses | (4,353) |
| (8,305) |
| (12,658) | |
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Operating profit | (5) |
| 1,067 |
| 1,062 | |
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Finance income |
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| - | |
Finance costs |
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| (253) | |
Profit before tax |
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| 809 | |
Tax |
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| (132) | |
Total comprehensive income for the period | 677 | |||||
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| Six Months Ended 30 June 2019 | ||||
| Built Environment |
| Water |
| Total | |
| £'000 |
| £'000 |
| £'000 | |
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Revenue | 51,874 |
| 132,104 |
| 183,978 | |
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Result before corporate expenses | 4,197 |
| 9,669 |
| 13,866 | |
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Corporate expenses | (3,609) |
| (6,716) |
| (10,325) | |
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Operating profit | 588 |
| 2,953 |
| 3,541 | |
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Finance income |
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| 37 | |
Finance costs |
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| (115) | |
Profit before tax |
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| 3,463 | |
Tax |
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| (705) | |
Total comprehensive income for the period | 2,758 | |||||
Segment assets |
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| 30 June | ||
| 2020 |
| 2019 |
| £'000 |
| £'000 |
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Built Environment | 62,600 |
| 59,725 |
Water | 63,628 |
| 61,293 |
Total segment assets and consolidated total assets | 126,228 |
| 121,018 |
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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 | |||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | |
| £'000 |
| £'000 |
| £'000 |
| £'000 | |
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Built Environment | 993 |
| 915 |
| 1,595 |
| 2,123 | |
Water | 1,951 |
| 1,696 |
| 3,007 |
| 3,932 | |
| 2,944 |
| 2,611 |
| 4,602 |
| 6,055 | |
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There were no impairment losses recognised in respect of property, plant and equipment. | ||||||||
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All of the above relates to continuing operations and arose in the United Kingdom.
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5. | Revenue from contracts with customers | ||||||
| The following table shows the Group's revenue from contracts with customers, disaggregated into major classes of revenue and reconciled to the amount of revenue reported for the Group's reportable segments (Note 4). From 1 January 2020 the Group restructured the Water segment to combine the nmcn Sustainable Solutions and NMCNomenca business units. All revenue for the Water segment is therefore categorised as Civil Engineering and MEICA. | ||||||
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| Six Months Ended 30 June 2020 | ||||
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| Built Environment |
| Water |
| Total | |
|
| £'000 |
| £'000 |
| £'000 | |
| Building | 20,347 |
| - |
| 20,347 | |
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| Highways | 18,586 |
| - |
| 18,586 | |
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| Telecommunications | 22,564 |
| - |
| 22,564 | |
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| Power & Industrial | 287 |
| - |
| 287 | |
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| Civil Engineering and MEICA | - |
| 119,842 |
| 119,842 | |
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| 61,784 |
| 119,842 |
| 181,626 | |
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| Six Months Ended 30 June 2019 | ||||
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| Built Environment |
| Water |
| Total | |
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| £'000 |
| £'000 |
| £'000 | |
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| Building | 17,620 |
| - |
| 17,620 | |
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| Highways | 15,750 |
| - |
| 15,750 | |
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| Telecommunications | 18,504 |
| - |
| 18,504 | |
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| nmcn Sustainable Solutions | - |
| 36,008 |
| 36,008 | |
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| NMCNomenca | - |
| 96,096 |
| 96,096 | |
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| 51,874 |
| 132,104 |
| 183,978 | |
Revenues of approximately £75,903,000 (2019: £92,010,000) within the Water segment were derived from a single external customer. |
| 6. | Earnings per share |
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| Basic earnings per share and diluted earnings per share are calculated on the profit attributable to equity holders of the parent of £677,000 (2019: £2,758,000). The weighted average of 10,396,108 (2019: 10,211,825) shares in issue during the period is used for the basic earnings per share calculation. Outstanding share awards granted under the Performance Share Plan ("PSP") totalling 714,182 awards (2019: 702,255) are considered to be contingently issuable shares that could potentially dilute basic earnings per share in the future, of which the performance-related vesting conditions had been satisfied in respect of 269,486 awards as at 30 June 2020 (2019: 264,986). This additional number of shares is therefore included in the diluted earnings per share calculation as at that date. |
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| 7. | Taxation |
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| In respect of the six months ended 30 June 2020, the corporation tax effective rate was 16% (2019: 20%). A corporation tax provision has been included in relation to the taxable profits of the Company. |
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| 8. | Dividends |
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| Amounts recognised as distributions to equity holders in the half year: |
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| Six Months to 30 June |
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| 2020 |
| 2019 |
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| £'000 |
| £'000 |
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| Final dividend for the year ended 31 December 2019 of nil (2018: 12.0p) per share | - |
| 1,214 |
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| The Directors propose a dividend of 10.0p (2019: 9.0p) per share. The total dividend of £1,040,000 (2019: £939,000), which will be paid on 11 September 2020 to the shareholders on the register at 14 August 2020.
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9. | Related parties | ||||||||||
| The Group's related parties are key management personnel who are the executive directors, non-executive directors and business unit leaders.
The Company has a controlling shareholder for the purposes of the Listing Rules, being the Moyle family and its associates. The relevant 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. | ||||||||||
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10. | Contingent liabilities | ||||||||||
| Aviva Insurance Limited and HCC International Insurance Co. Ltd have given Performance Bonds to a value of £13,859,000 (2019: £8,264,000) on the Group's behalf. These bonds have been made with recourse to the Group. | ||||||||||
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11. | Share capital | ||||||||||
| The Group has previously purchased 42,500 of its ordinary shares, which are held as treasury shares. Shares held in treasury may subsequently be cancelled, sold for cash or used to satisfy options exercised under any of the Company's share schemes. Whilst held in treasury, the shares are not entitled to receive any dividend or dividend equivalent (apart from any issue of bonus shares) and have no voting rights.
The total number of ordinary shares in issue and total number of voting rights in the Company, excluding shares held as treasury shares, was 10,396,108 as at 30 June 2020 (2019: 10,406,108).
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12. | Seasonality | ||||||||||
| The Group's activities are not subject to significant seasonal variations. | ||||||||||
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13. | 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 2019. | ||||||||||
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14. | Responsibility Statement of the Directors in respect of the half-yearly financial report | ||||||||||
| We confirm that to the best of our knowledge: | ||||||||||
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| · | 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; | |||||||||
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| · | the interim management report includes a fair review of the information required by: | |||||||||
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| (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 | ||||||||
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| (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 Daniel Taylor, Chief Financial Officer
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6 August 2020 |
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Related Shares:
NMCN.L