24th Aug 2012 07:00
NORTH MIDLAND CONSTRUCTION PLC
UNAUDITED CONDENSED GROUP HALF YEARLY FINANCIAL STATEMENTS
24 August 2012
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 2012.
Highlights from the results and the Chairman's Statement:-
Six Months Ended | Six Months Ended | ||||
30 June 2012 | 30 June 2011 | ||||
£'000 | £'000 | ||||
Revenue | 74,873 | 91,314 | |||
Profit Before Exceptional Items | 115 | 109 | |||
Exceptional Items | - | 1203 | |||
Profit before Tax | 115 | 1,312 | |||
Total Comprehensive Income | 86 | 1,283 | |||
Earnings per Share | 0.23p | 12.52p | |||
Proposed Dividends | 1.5p | 2.5p |
·; Revenue reduced by 18% compared with previous year.
·; Profit Before Exceptional Items increased by 5.5% compared with previous year
·; Significant loss in Building & Civil Engineering and Utilities.
·; An excellent result from Nomenca Limited.
·; Interim dividend of 1.5p per share.
For further information:-
| ||
Robert Moyle, Chairman | - | 01623 518812 |
North Midland Construction PLC | ||
CHAIRMAN'S STATEMENT
The result for the half year is a disappointment, with profit before tax reduced from £1.31 million to £0.11 million on revenue reduced by 18.0% to £74.87 million. However, the 2011 result included an exceptional item profit of £1.20 million emanating from the successful appeal to the OFT fine. Current trading has progressed, but further provisions have been made during the period for projected losses on the resolution of certain contracts previously undertaken by the building subsidiary.
The Building & Civil Engineering division consequently has delivered a half year loss of £0.28 million on a revenue of £22.20 million. The completion date on the problematical major project inherited from the Building subsidiary has been further extended and the projected costs of this extension have been provided for, alongwith additional legal costs expected to be expended in the pursuit of the contractual claim for the reimbursement of extra costs incurred. Aside of these additional provisions, the division is trading profitably with the two major civil engineering projects and the framework contracts in the power sector progressing satisfactorily. The division has recently secured orders on the Nottingham Tram Extension and, whilst the building market remains extremely thin and highly competitive, outstanding current orders to be completed this year stand at £20.35 million. Major resources have been committed to the completion of the principal loss-making contract and the associated contractual claim and once this occurs, the division's performance will progress.
The purchase of the minority interests within Nomenca was completed on 17 July 2012 and this has enabled management to concentrate on the growth of the Group's integrated water business, namely NMCNomenca. NMCNomenca has delivered a satisfactory half year profit of £0.81 million on a revenue of £22.45 million. These results are incorporated within the results of the Building & Civil Engineering division and Nomenca subsidiaries on a proportional basis. As previously reported, the division is a member of the E5 consortium undertaking a collection of major projects for Severn Trent Water. It is still very early in the programme, but the prospects look promising. An element of restructuring is currently being undertaken to strengthen the division to facilitate expansion within the water sector. Secured orders for completion this financial year are currently £25 million.
The Nomenca subsidiary has maintained its growth, with revenue increasing by 32% to £38.70 million and profitability rising by 8.7% to £0.50 million. Nomenca is benefiting from maintained expenditure by the water sector on the various frameworks being undertaken on the AMP5 programme and the chemical dosing business is proving very resilient. Nomenca's revenue for the full year is expected to exceed forecast.
Public sector expenditure cutbacks with consequential reduced levels of activity on its existing framework have, as reported at the Annual General Meeting, continued to affect the Highways Division. Profitability declined by 47.6% to £0.13 million on revenue reduced by 28.2% at £5.60 million. Current workload for completion this year is £14 million and further orders need to be secured if the budget of £21 million is to be achieved. However, whilst margins remain extremely competitive, the outlook for tender opportunities is positive.
The Utilities division is well represented in the telecommunications sector serving most of the major companies. Expenditure by these clients has been severely curtailed and revenue has declined by 58.8% to £8.37 million, resulting in a loss for the period of £0.22 million. A restructuring programme had been implemented to deliver significant cost reduction, however the severity and scale of the expenditure cutback will necessitate a further reduction in the scale of the business to match the current market. On a positive note, utility work has been secured on the Nottingham Tram extension.
There was a net cash outflow during the period due to high levels of work in progress within the Utilities and Building & Civil Engineering divisions and extended payment terms being experienced across the Group however the Group continues to operate well within its banking facilities.
These results are extremely disappointing and are exacerbated by one off provisions and the overall decline in UK construction sector output, which has become significantly more pronounced in the first half of this year. Restructuring is ongoing to reduce the cost base to accommodate this market shrinkage in the short term and provide a platform for growth in the future. The Group is diversified and well represented across the construction sector and growth, most particularly in the water sector, is still achievable. The Board's intention is to maintain a return to shareholders. Therefore, the payment of a reduced interim dividend of 1.5p per share, which will be paid on 28 September 2012 to the shareholders on the register on 7 September 2012, is recommended by the Board.
Robert Moyle
Chairman
North Midland Construction PLC
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
The unaudited condensed Group results for the half year ended 30 June 2012 are shown below together with the unaudited Group results for the half year ended 30 June 2011 and the audited Group results for the year ended 31 December 2011.
Six Months Ended 30 June | Year Ended | ||||
2012 | 2011 | 31 December 2011 | |||
£'000 | £'000 | £'000 | |||
Revenue | 74,873 | 91,314 | 167,220 | ||
Other operating income | 39 | 1,257 | 1,481 | ||
74,912 | 92,571 | 168,701 | |||
Raw material and consumables | (14,299) | (16,393) | (36,548) | ||
Other external charges | (38,122) | (53,405) | (90,196) | ||
Employee costs | (20,086) | (19,389) | (38,412) | ||
Depreciation of property, plant & equipment | (798) | (818) | (1,645) | ||
Other operating charges | (1,472) | (1,235) | (2,616) | ||
Operating profit/(loss) | 135 | 1,331 | (716) | ||
Analysed as:- | |||||
Operating profit/(loss) before exceptional items | 135 | 128 | (706) | ||
Exceptional items (Note 3) | - | 1,203 | (10) | ||
Operating profit/(loss) | 135 | 1,331 | (716) | ||
Interest received | 11 | 18 | 24 | ||
Finance costs | (31) | (37) | (91) | ||
Profit/(loss) before tax | 115 | 1,312 | (783) | ||
Tax (Note 5) | (29) | (29) | 147 | ||
Profit/(loss) for the period | 86 | 1,283 | (636) | ||
Other comprehensive income | - | - | - | ||
Total comprehensive income/(loss) for the period | 86 | 1,283 | (636) | ||
Attributed to:- | |||||
Non-controlling interest | 63 | 56 | 121 | ||
Equity holders of the parent | 23 | 1,227 | (757) | ||
86 | 1,283 | (636) | |||
Earnings per share basic and diluted (Note 4) | 0.23p | 12.52p | (7.72p) | ||
Dividend per share (Note 6) | 3.00p | 6.00p | 8.50p | ||
UNAUDITED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Capital | Non- | ||||||||
Share | Redemption | Retained | Controlling | ||||||
Capital | Reserve | Earnings | Interest | Total | |||||
£'000 | £'000 | £'000 | £'000 | £'000 | |||||
Balance at 1 January 2011 | 980 | 20 | 18,858 | 499 | 20,357 | ||||
Profit and total comprehensive income for the period | - | - | 1,227 | 56 | 1,283 | ||||
Dividends paid | - | - | (588) | (30) | (618) | ||||
Balance at 30 June 2011 | 980 | 20 | 19,497 | 525 | 21,022 | ||||
(Loss)/profit and total comprehensive income for the period | - | - | (1,984) | 65 | (1,919) | ||||
Dividends paid | - | - | (245) | (17) | (262) | ||||
Balance at 1 January 2012 | 980 | 20 | 17,268 | 573 | 18,841 |
Profit and total comprehensive income for the period | - | - | 23 | 63 | 86 | ||||
Dividends paid | - | - | (294) | (43) | (337) | ||||
Balance at 30 June 2012 | 980 | 20 | 16,997 | 593 | 18,590 |
UNAUDITED CONDENSED GROUP BALANCE SHEET
The unaudited condensed Group Balance Sheets at 30 June 2012 and 30 June 2011 are shown below together with the audited Group Balance Sheet at 31 December 2011.
30 June | 31 December | ||||||
2012 | 2011 | 2011 | |||||
£'000 | £'000 | £'000 | |||||
Assets | |||||||
Non-Current Assets | |||||||
Property, plant and equipment | 10,734 | 10,872 | 10,573 | ||||
Goodwill | - | 1,267 | - | ||||
Deferred tax asset | 140 | - | 140 | ||||
10,874 | 12,139 | 10,713 | |||||
Current Assets | |||||||
Inventories | 1,476 | 1,820 | 1,551 | ||||
Construction contracts | 12,373 | 13,921 | 12,187 | ||||
Trade and other receivables | 33,380 | 35,347 | 32,064 | ||||
Cash and cash equivalents | - | 1,122 | 9,229 | ||||
47,229 | 52,210 | 55,031 | |||||
Total Assets | 58,103 | 64,349 | 65,744 | ||||
Equity & Liabilities | |||||||
Capital & Reserves attributable to equity holders of the Parent | |||||||
Share capital | 980 | 980 | 980 | ||||
Capital redemption reserve | 20 | 20 | 20 | ||||
Retained earnings | 16,997 | 19,497 | 17,268 | ||||
17,997 | 20,497 | 18,268 | |||||
Non-controlling interest | 593 | 525 | 573 | ||||
Total Equity | 18,590 | 21,022 | 18,841 | ||||
Liabilities | |||||||
Non-current Liabilities | |||||||
Obligation under finance leases - due after one year | 771 | 1,083 | 895 | ||||
Provisions | 470 | 614 | 579 | ||||
Deferred tax | - | 15 | - | ||||
1,241 | 1,712 | 1,474 | |||||
Current Liabilities | |||||||
Trade & other payables | 35,509 | 40,770 | 44,579 | ||||
Current income tax payable | 33 | 25 | 4 | ||||
Obligations under finance leases - due within one year | 890 | 820 | 846 | ||||
Current borrowings | 1,840 | - | - | ||||
38,272 | 41,615 | 45,429 | |||||
Total Liabilities | 39,513 | 43,327 | 46,903 | ||||
Total Equity & Liabilities | 58,103 | 64,349 | 65,744 | ||||
UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS
The unaudited condensed Group statement of cash flows for the periods ended at 30 June 2012 and 30 June 2011 are shown below together with the audited Group statement of cash flow for the year ended 31 December 2011.
Six Months Ended 30 June | Year Ended | |||||
2012 | 2011 | 31 December 2011 | ||||
£'000 | £'000 | £'000 | ||||
Cash flows from operating activities | ||||||
Operating profit/(loss) | 135 | 1,331 | (716) | |||
Adjustments for: | ||||||
Depreciation of property, plant and equipment | 798 | 818 | 1,645 | |||
(Gain) on disposal of property, plant and equipment | (39) | (56) | (219) | |||
(Decrease)/increase in provisions | (109) | 54 | 19 | |||
Goodwill impairment | - | - | 1,267 | |||
Operating cash flows before movements in | ||||||
working capital | 785 | 2,147 | 1,996 | |||
Decrease in inventories | 75 | 119 | 388 | |||
(Increase)/decrease in construction contracts | (186) | (1,628) | 106 | |||
(Increase) in receivables | (1,316) | (6,612) | (3,329) | |||
(Decrease)/increase in payables | (9,070) | 1,009 | 4,818 | |||
Cash (used in)/generated from operations | (9,712) | (4,965) | 3,979 | |||
Income Tax paid | - | (1,092) | (1,092) | |||
Interest received | 11 | 18 | 24 | |||
Interest paid | (31) | (37) | (91) | |||
Net cash (used in)/generated from operating activities | (9,732) | (6,076) | 2,820 | |||
Cash flows from investing activities | ||||||
Purchase of property, plant and equipment | (558) | (742) | (1,021) | |||
Proceeds on disposal of property, plant and equipment | 39 | 59 | 257 | |||
Net cash (used in) investing activities | (519) | (683) | (764) | |||
Cash flows from financing activities | ||||||
Equity dividend paid | (294) | (588) | (833) | |||
Dividend paid to non-controlling interest | (43) | (30) | (47) | |||
Repayments of obligations under finance leases | (481) | (412) | (858) | |||
Net cash (used in) investing activities | (818) | (1,030) | (1,738) | |||
Net (decrease)/increase in cash and cash equivalents | (11,069) | (7,789) | 318 | |||
Cash and cash equivalents at 1 January 2012 | 9,229 | 8,911 | 8,911 | |||
(Current borrowings)/ cash and cash equivalents at 30 June 2012 | (1,840) | 1,122 | 9,229 | |||
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 2011. 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 2011. The comparative figures for the year ended 31 December 2011 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 accounting policies adopted in the preparation of the condensed consolidated half-yearly financial statements to 30 June 2012 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2011. The Group has considered amendments to existing standards and interpretations that are effective for the year ending 31 December 2012 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 2011. | |
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 2011. | |
2. | Segment reporting |
Following the reorganisation in January 2012 when the trade from the Building subsidiary was transferred to the Civil Engineering division, 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 building and civil engineering, highways and utilities divisions - Nomenca - mechanical and electrical engineering products and services
Segment revenue and profit |
Six Months Ended 30 June 2012 | |||||||||
Building & Civil Engineering | Highways | Utilities | Nomenca | Total | |||||
£'000 | £'000 | £'000 | £'000 | £'000 | |||||
Revenue | |||||||||
External sales | 22,203 | 5,602 | 8,372 | 38,696 | 74,873 | ||||
Result before | |||||||||
corporate expenses | 381 | 453 | (48) | 2,274 | 3,060 | ||||
Corporate expenses | (659) | (321) | (171) | (1,774) | (2,925) | ||||
Operating profit/(loss) before exceptional item |
(278) |
132 |
(219) |
500 |
135 | ||||
Exceptional item (Note 3) | - | ||||||||
Operating profit | 135 | ||||||||
Net finance costs | (20) | ||||||||
Profit before tax | 115 | ||||||||
Tax | (29) | ||||||||
Total comprehensive income for the period | 86 | ||||||||
Six Months Ended 30 June 2011 | |||||||||
Building & Civil Engineering | Highways | Utilities | Nomenca | Total | |||||
£'000 | £'000 | £'000 | £'000 | £'000 | |||||
Revenue | |||||||||
External sales | 33,890 | 7,799 | 20,314 | 29,311 | 91,314 | ||||
Result before | |||||||||
corporate expenses | 2,087 | 881 | 1,614 | 1,933 | 6,515 | ||||
Corporate expenses | (3,266) | (629) | (1,019) | (1,473) | (6,387) | ||||
Operating profit | (1,179) | 252 | 595 | 460 | 128 | ||||
Exceptional items (Note 3) | 1,203 | ||||||||
Operating profit | 1,331 | ||||||||
Net finance costs | (19) | ||||||||
Profit before tax | 1,312 | ||||||||
Tax | (29) | ||||||||
Total comprehensive income for the period | 1,283 | ||||||||
Segment assets | ||||||||
30 June | ||||||||
2012 | 2011 | |||||||
£'000 | £'000 | |||||||
Building & Civil Engineering | 27,479 | 29,022 | ||||||
Highways | 6,933 | 7,117 | ||||||
Utilities | 10,361 | 18,538 | ||||||
Nomenca | 13,330 | 9,672 | ||||||
Total segment assets and consolidated total assets | 58,103 | 64,349 | ||||||
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 | |||||||
30 June | 30 June | |||||||
2012 | 2011 | 2012 | 2011 | |||||
£'000 | £'000 | £'000 | £'000 | |||||
Building & Civil engineering | 481 | 369 | 577 | 652 | ||||
Highways | 122 | 121 | 146 | 222 | ||||
Utilities | 182 | 314 | 218 | 579 | ||||
Nomenca | 13 | 14 | 18 | 6 | ||||
798 | 818 | 959 | 1,459 | |||||
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 £27,620,000 (2011 : £26,557,000) were derived from a single external customer. These revenues are attributable to the Building & Civil Engineering and Nomenca segments. | ||||||||
3. | Exceptional items | ||||||||
The exceptional items are:- | |||||||||
Six Months Ended 30 June | Year Ended 31 December | ||||||||
2012 | 2011 | 2011 | |||||||
£'000 | £'000 | £'000 | |||||||
Release of provision previously made in respect of the fine levied by the Office of Fair Trading following the successful appeal |
- |
1,203 |
1,257 | ||||||
Impairment of Goodwill relating to the Building subsidiary | - | - | (1,267) | ||||||
- | 1,203 | (10) | |||||||
4. | Earnings per share | ||||||||
The basic and diluted earnings per share are the same and have been calculated on profits of £23,000 (2011 : £1,227,000) and the weighted average number of shares in issue of 9,800,000 (2011 : 9,800,000) shares in issue. | |||||||||
5. | Taxation | ||||||||
In respect of the six months ended 30 June 2012, corporation tax has been provided at 24.5% (2011 : 27%) of the profit without deferment. | |||||||||
6. | Dividends | ||||||||
Amounts recognised as distributions to equity holders in the half year:- | |||||||||
Six Months to June | |||||||||
2012 | 2011 | ||||||||
£'000 | £'000 | ||||||||
Final dividend for the year ended 31 December 2011 of 3p (2010 : 6p) per share | 294 | 588 | |||||||
The Directors propose an interim dividend of 1.5p per share (2011 : 2.5p per share), total £152,250 (2011 : £245,000), which will be paid on 28 September 2012 to the shareholders on the register on 7 September 2012. | |||||||||
7. | Purchase of minority interests in Nomenca Limited | |||||
As explained to shareholders in the circular dated 26 June 2012, the Company announced that it was proposing to acquire the minority shareholdings in its subsidiary Nomenca Limited for a total consideration of £1,080,000. The total consideration comprised £590,000 in cash and the issue of 350,000 ordinary shares equating to £490,000 based on the middle market price as at 25 June 2012. The ordinary resolution to allot the shares was passed at the General Meeting held on 17 July 2012 and the purchase of the minority interests was completed on 17 July 2012. | ||||||
8. | 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. | ||||||
9. | 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 £5,337,879 (2011 : £4,121,745) on the Group's behalf. These bonds have been made with recourse to the Group. | ||||||
10. | Seasonality | |||||
The Group's activities are not subject to significant seasonal variations. | ||||||
11. | 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 2011. | ||||||
12. | 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 the applicable set of accounting standards, 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. | |||||
A copy of this circular will be sent to all shareholders on 24 August 2012 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).
R Moyle | |
Chairman | |
M S Garratt | |
Finance Director |
24 August 2012
Related Shares:
NMCN.L