22nd Aug 2014 12:30
22 August 2014
NORTH MIDLAND CONSTRUCTION PLC
UNAUDITED CONDENSED GROUP HALF YEARLY FINANCIAL STATEMENTS
North Midland Construction PLC (the "Company") the UK provider of civil engineering, building, mechanical and electrical services to public and private organisations, announces interim results for the six months ended 30 June 2014.
Highlights:-
Six Months Ended | Six Months Ended | ||||
30 June 2014 | 30 June 2013 | ||||
£'000 | £'000 | ||||
Revenue | 90,976 | 89,387 | |||
Profit/(loss) Before Tax | 371 | (480) | |||
Total Comprehensive Income | 332 | (369) | |||
Earnings/(loss) per Share | 3.27p | (3.64p) | |||
Proposed Dividends | Nil | 3.00p |
o Revenue increased by 1.7% compared with previous year.
o Profit/(loss) before tax increased to a £0.37 million profit (2013: loss of £0.48 million).
o Underlying profits, excluding provisions relating to problematic contracts, increased to £1.78 million (2013: £1.24 million).
o Significant £0.84 million loss in Building & Civil Engineering division (2013: £1.58 million).
o Current order book for work to be undertaken in this financial year is £178 million (2013: £160 million).
For further information:-
| ||
Robert Moyle, Chairman | - | 01623 518812 |
North Midland Construction PLC | ||
Chairman's Statement
The result for the half-year demonstrates the further progress that has been made since our Interim Management Statement released on 19 May 2014. A reported profit before tax of £0.37 million (H1 FY13 loss before tax £0.48 million) was delivered on revenues up by 1.5% to £90.98 million (H1 FY13 £89.39 million) for the period. Excluding movements in provisions relating to problematic contracts the underlying profit before tax of the business was £1.78 million (H1 FY13 £1.24 million) for the period.
Problems still remain in the B & CE division, which has been completely restructured under new management, with the resolution of three legacy contracts. This has resulted in further provisions being taken, with a consequent operating loss of £0.84 million for the period (H1 FY13 £1.58 million loss), on a revenue reduced by 31.3% to £11.72 million (H1 FY13 £16.81 million). Progress is being made in the resolution of these contracts, but the timing of which is proving to be problematical. Pleasingly, the underlying business is now trading profitably and the division continues to perform well for longstanding clients such as Tata Steel, Western Power Distribution (WPD) and East Midlands Housing Association with one recent award being for a £3 million office block in Grove Park, Leicester, which is due to commence in September.
The NMCNomenca division has had a very encouraging first half-year, with operating profitability increasing by 7.9% to £0.94 million (H1 FY13 £0.87 million), on revenue increased by 10.8% to £41.31 million (H1 FY13 £37.29 million). The AMP5 programme is drawing to a conclusion with the inevitable pressure on margins, but costs have been controlled and the division is performing to expectations. Severn Trent Water have recently awarded the division the Asset Maintenance Framework covering their Eastern Area, at a value of approximately £6 million per annum. The framework is of a five year duration, with the option of a two year extension. Also, in conjunction with Laing O'Rourke, the division has been the recipient of an order to reconstruct Ambergate Reservoir, valued at £16.5 million. Preparatory work has already commenced on the Severn Trent Water AMP6 programme, which was secured in December 2013. The E5 programme for Severn Trent Water, for which NMCNomenca has a 25% share of the construction consortium, will be virtually complete by the end of the year and the projected outturn continues to remaining encouraging.
Nomenca, the mechanical and electrical subsidiary, has had a slow start to the year, with revenue declining by 3.7% to £19.04 million (H1 FY13 £19.77 million). However, operating profitability was maintained at £0.18 million (H1 FY13 £0.18 million). The reduction in revenues was caused by the delayed award of a major project and reduced expenditure on one particular framework. Revenue is expected to increase in the second half of the year and a further £24 million of orders have already been secured for completion this year. Although this means that the performance of this division will be weighted towards the second half of the year, we are confident that the division will perform in line with our expectations.
Whilst operationally the Utilities and Highways divisions deliver under one management structure, financially they continue to report segmentally. The Highways division has suffered a slower start to the year than originally forecast, with delays in anticipated expenditure on the secured frameworks and in the award of a major project. In spite of this, revenue escalated to £7.71 million (H1 FY13 £6.00 million), but this was insufficient to cover the overheads, which had been increased in anticipation of the projected increased revenue. Therefore, an operating divisional loss of £0.01 million (H1 FY13 £0.07 million operating profit) was incurred. Secured revenue for this year currently stands at £24.60 million, so the second half-year will show a significant increase and a return to profitability.
The Utilities division has been the beneficiary of increased expenditure by the telecoms companies on broadband infrastructure and this has caused revenue to rise by 15.5% to £11.0 million (H1 FY13 £9.52 million) with operating profitability increasing to £0.14 million (H1 FY13 £0.004 million). The division is well represented with frameworks for the major telecom companies and all the indications are that expenditure on these frameworks will remain robust.
There was a net outflow of cash, compared with the figure of 31 December 2013, of £8.59 million, and cash collection in certain areas remains both difficult and protracted. The major problematical legacy building contract remains cash negative and the resolution of final accounts of legacy contracts within the B & CE division remains protracted and this, coupled with an increase in working capital as revenue increases, have contributed to this outflow. The Company's current banking facilities are sufficient to meet the anticipated needs of the business going forward.
The return to profitability is encouraging and orders received to date to be executed this financial year stand at £178 million. 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. Accordingly, the Directors feel that a prudent approach has to be adopted and feel, therefore, that the payment of an interim dividend is inappropriate. The principal risks and challenges for the future are outlined above and remain as fully disclosed in the annual report to 31 December 2013.
Robert Moyle
Chairman
North Midland Construction PLC
22 August 2014
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
The unaudited condensed Group results for the half year ended 30 June 2014 are shown below together with the unaudited Group results for the half year ended 30 June 2013 and the audited Group results for the year ended 31 December 2013.
Six Months Ended 30 June | Year Ended | ||||
2014 | 2013 | 31 December 2013 | |||
£'000 | £'000 | £'000 | |||
Revenue | 90,976 | 89,387 | 177,555 | ||
Other operating income | 36 | 23 | 31 | ||
91,012 | 89,410 | 177,586 | |||
Raw material and consumables | (17,268) | (13,542) | (27,590) | ||
Other external charges | (46,951) | (52,365) | (108,060) | ||
Employee costs | (23,608) | (21,632) | (42,905) | ||
Depreciation of property, plant & equipment | (871) | (851) | (1,711) | ||
Other operating charges | (1,907) | (1,469) | (3,175) | ||
Operating profit/(loss) | 407 | (449) | (5,855) | ||
Interest received | 2 | 4 | |||
Finance costs | (36) | (33) | (121) | ||
Profit/(loss) before tax | 371 | (480) | (5,972) | ||
Tax (Note 4) | (39) | 111 | 71 | ||
Profit/(loss) for the period | 332 | (369) | (5,901) | ||
Other comprehensive income | - | - | - | ||
Total comprehensive (loss)/income for the period | 332 |
(369) |
(5,901) | ||
Attributed to:- | |||||
Equity holders of the parent | 332 | (369) | (5,901) | ||
332 | (369) | (5,901) | |||
Earnings per share basic and diluted (Note 3) | 3.27p | (3.64p) | (58.14p) | ||
Dividend per share (Note 5) | NIL | 3.00p | NIL | ||
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 2013 | 1,015 | 455 | 20 | 16,775 | 18,265 | ||||
(Loss) and total comprehensive income for the period | - | - | - | (369) | (369) | ||||
Dividends paid | - | - | - | (304) | (304) | ||||
Balance at 30 June 2013 | 1,015 | 455 | 20 | 16,102 | 17,592 | ||||
(Loss) and total comprehensive income for the period | - | - | - | (5,532) | (5,532) | ||||
Dividends paid | - | - | - | (103) | (103) | ||||
Balance at 31 December 2013 | 1,015 | 455 | 20 | 10,467 | 11,957 | ||||
Profit and total comprehensive income for the period | - | - | - | 332 | 332 | ||||
Dividends paid | - | - | - | - | |||||
Balance at 30 June 2014 | 1,015 | 455 | 20 | 10,799 | 12,289 |
UNAUDITED CONDENSED GROUP BALANCE SHEET
The unaudited condensed Group Balance Sheets as at 30 June 2014 and 30 June 2013 are shown below together with the audited Group Balance Sheet as at 31 December 2013.
30 June | 31 December | ||||||
2014 | 2013 | 2013 | |||||
£'000 | £'000 | £'000 | |||||
Assets | |||||||
Non-Current Assets | |||||||
Property, plant and equipment | 11,136 | 10,408 | 10,984 | ||||
Deferred tax asset | 103 | 77 | 103 | ||||
11,239 | 10,485 | 11,087 | |||||
Current Assets | |||||||
Inventories | 1,534 | 1,683 | 1,529 | ||||
Construction contracts | 19,573 | 18,930 | 16,214 | ||||
Trade and other receivables | 33,609 | 31,762 | 30,692 | ||||
Current income tax receivable | - | - | 33 | ||||
Cash and cash equivalents | - | 2,430 | 4,877 | ||||
54,716 | 54,805 | 53,345 | |||||
Total Assets | 65,955 | 65,290 | 64,432 | ||||
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 | 10,799 | 16,102 | 10,467 | ||||
Total Equity | 12,289 | 17,592 | 11,957 | ||||
Liabilities | |||||||
Non-current Liabilities | |||||||
Obligation under finance leases - due after one year | 912 | 787 | 685 | ||||
Provisions | 270 | 242 | 242 | ||||
1,182 | 1,029 | 927 | |||||
Current Liabilities | |||||||
Trade & other payables | 47,862 | 45,943 | 50,782 | ||||
Current income tax payable | 6 | 7 | - | ||||
Obligations under finance leases - due within one year | 901 | 719 | 766 | ||||
Current borrowings | 3,715 | - | - | ||||
52,484 | 46,669 | 51,548 | |||||
Total Liabilities | 53,666 | 47,698 | 52,475 | ||||
Total Equity & Liabilities | 65,955 | 65,290 | 64,432 | ||||
UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS
The unaudited condensed Group statement of cash flows for the periods ended 30 June 2014 and 30 June 2013 are shown below together with the audited Group statement of cash flow for the year ended 31 December 2013.
Six Months Ended 30 June | Year Ended | |||||
2014 | 2013 | 31 December 2013 | ||||
£'000 | £'000 | £'000 | ||||
Cash flows from operating activities | ||||||
Operating profit/(loss) | 407 | (449) | (5,855) | |||
Adjustments for: | ||||||
Depreciation of property, plant and equipment | 871 | 851 | 1,711 | |||
Gain on disposal of property, plant and equipment | (25) | (23) | (30) | |||
Increase/(Decrease) in provisions | 28 | (108) | (108) | |||
Operating cash flows before movements in | ||||||
working capital | 1,281 | 271 | (4,282) | |||
(Increase)/decrease in inventories | (5) | (187) | (33) | |||
(Increase)/decrease in construction contracts | (4,908) | (2,162) | 554 | |||
(Increase)/decrease in receivables | (2,014) | 641 | 1,711 | |||
(Decrease)/increase in payables | (2,233) | 45 | 4,884 | |||
Cash (used in) operations | (7,879) | (1,392) | 2,834 | |||
Income Tax paid | - | - | (103) | |||
Interest received | - | 2 | 4 | |||
Interest paid | (36) | (33) | (121) | |||
Net cash (used in) operating activities | (7,915) | (1,423) | 2,614 | |||
Cash flows from investing activities | ||||||
Purchase of property, plant and equipment | (267) | (423) | (1,472) | |||
Proceeds on disposal of property, plant and equipment | 33 | 48 | 56 | |||
Net cash (used in) financing activities | (234) | (375) | (1,416) | |||
Cash flows from financing activities | ||||||
Equity dividend paid | - | (304) | (407) | |||
Repayments of obligations under finance leases | (443) | (533) | (979) | |||
Net cash (used in) financing activities | (443) | (837) | (1,386) | |||
Net (decrease) in cash and cash equivalents | (8,592) | (2,635) | (188) | |||
Cash and cash equivalents at 1 January 2014 | 4,877 | 5,065 | 5,065 | |||
Cash and cash equivalents/(current borrowings) at 30 June 2014 | (3,715) | 2,430 | 4,877 | |||
1. | Basis of preparation |
The unaudited condensed consolidated 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 (IFRS's) as adopted by the European Union that are effective for the full year ending 31 December 2013. 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 2013. The comparative figures for the year ended 31 December 2013 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 condensed half yearly financial statements. | |
The accounting policies adopted in the preparation of the condensed consolidated half-yearly financial statements to 30 June 2014 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2013. The Group has considered amendments to existing standards and interpretations that are effective for the year ending 31 December 2014 and is of the view that they have no impact on the half-yearly accounts. | |
The preparation of consolidated 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 condensed 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 2013. | |
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 2013. | |
2. | Segment reporting |
Following the reorganisation in January 2014 when the trade from the NMCNomenca was treated as a separate division rather than being split equally between the Nomenca subsidiary and the Building & Civil Engineering division, the business segment reporting format reflects the Group's management and internal reporting structure. The six months ended 30 June 2013 have been adjusted accordingly.
Business segments 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 |
Six Months Ended 30 June 2014 | |||||||||||
Building & Civil Engineering | Highways | Utilities | NMCNomenca | Nomenca | Total | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Revenue | |||||||||||
External sales | 11,721 | 7,712 | 10,995 | 41,311 | 19,037 | 90,776 | |||||
Result before | |||||||||||
corporate expenses | (488) | 382 | 447 | 2,281 | 1,914 | 4,536 | |||||
Corporate expenses | (355) | (396) | (307) | (1,338) | (1,733) | (4,129) | |||||
Operating profit/(loss) | (843) | (14) | 140 | 943 | 181 | 407 | |||||
Net finance costs | (36) | ||||||||||
Profit before tax | 371 | ||||||||||
Tax | (39) | ||||||||||
Total comprehensive income for the period | 332 | ||||||||||
Six Months Ended 30 June 2013 | |||||||||||
Building & Civil Engineering | Highways | Utilities | NMCNomenca | Nomenca | Total | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Revenue | |||||||||||
External sales | 16,807 | 6,005 | 9,523 | 37,287 | 19,765 | 89,387 | |||||
Result before | |||||||||||
corporate expenses | (726) | 343 | 156 | 2,307 | 1,264 | 3,344 | |||||
Corporate expenses | (853) | (273) | (152) | (1,433) | (1,082) | (3,793) | |||||
Operating (loss)/profit | (1,579) | 70 | 4 | 874 | 182 | (449) | |||||
Net finance costs | (31) | ||||||||||
(Loss) before tax | (480) | ||||||||||
Tax | 111 | ||||||||||
Total comprehensive income for the period | (369) | ||||||||||
Segment assets | ||||||||
30 June | ||||||||
2014 | 2013 | |||||||
restated | ||||||||
£'000 | £'000 | |||||||
Building & Civil Engineering | 22,608 | 24,258 | ||||||
Highways | 6,018 | 4,504 | ||||||
Utilities | 16,028 | 13,323 | ||||||
NMCNomenca | 8,527 | 7,492 | ||||||
Nomenca | 12,774 | 15,713 | ||||||
Total segment assets and consolidated total assets | 65,955 | 65,290 | ||||||
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. The previous year's segment assets have been restated to show a more appropriate allocation across the segments, on a consistent basis with the current period. | ||||||||
Other segment information | ||||||||
Depreciation and | Additions to | |||||||
amortisation | non-current assets | |||||||
30 June | 30 June | |||||||
2014 | 2013 | 2014 | 2013 | |||||
£'000 | £'000 | £'000 | £'000 | |||||
Building & Civil engineering | 142 | 202 | 175 | 159 | ||||
Highways | 94 | 114 | 115 | 57 | ||||
Utilities | 133 | 73 | 164 | 90 | ||||
NMCNomenca | 492 | 448 | 618 | 353 | ||||
Nomenca | 10 | 14 | - | - | ||||
871 | 851 | 1,073 | 659 | |||||
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 £35,281,000 (2013 : £32,256,000) were derived from a single external customer. These revenues are attributable to the NMCNomenca and Nomenca segments. | ||||||||
3. | Earnings per share | ||||||||
The basic and diluted earnings per share are the same and have been calculated on profits of £332,000 (2013: losses of £369,000) and a weighted average number of shares in issue of 10,150,000 (2013: 10,150,000). | |||||||||
4. | Taxation | ||||||||
In respect of the six months ended 30 June 2014, the corporation tax effective rate was 21.5% (2013: 23.25%). A corporation tax provision has been included in relation to the taxable profits of Nomenca Limited. No provision has been made for the six months ended 30 June 2014 for any other Group taxable profits due to the bought forward tax losses within the group. | |||||||||
5. | Dividends | ||||||||
Amounts recognised as distributions to equity holders in the half year:- | |||||||||
Six Months to June | |||||||||
2014 | 2013 | ||||||||
£'000 | £'000 | ||||||||
Final dividend for the year ended 31 December 2013 of £Nil (2012: 3p) per share | - | 304 | |||||||
The Directors propose an interim dividend of £Nil per share (2013: 1p, total £101,500). | |||||||||
6. | Related parties | ||||||||
The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers. | |||||||||
7. | Contingent liabilities | ||||||||
Euler Hermes Guarantee plc, Lloyds TSB, Aviva Insurance Limited and HCC International Insurance Co. Ltd have given Performance Bonds to a value of £3,835,907 (2013 : £4,774,793) 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 2013. | |||||||||
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. | ||||||||
R Moyle | |
Chairman | |
D A Taylor | |
Finance Director |
22 August 2014
A copy of this interim report will be sent to all shareholders on 22 August 2014 and copies will be available from the registered office, Nunn Close, The County Estate, Huthwaite, Sutton-in-Ashfield, Nottinghamshire, NG17 2HW, for 14 days from today's date. This report will also be available on the Group's website (www.northmid.co.uk). The interim report will also shortly be available for inspection at the UK Listing Authority's National Storage Mechanism website: http://www.hemscott.com/nsm.do.
Related Shares:
NMCN.L