Interim Results

Six Months Ended

Six Months Ended

30 June 2017

30 June 2016

£'000

£'000

Revenue

135,134

129,580

Profit Before Tax

1,220

512

Total Comprehensive Income

982

476

Earnings per Share

9.67p

4.69p

Proposed Dividends

3.0p

1.5p

For further information:-

John Homer, Chief Executive

Daniel Taylor, Group Finance Director

01623 518008

North Midland Construction PLC

Six Months Ended 30 June

Year Ended

2017

2016

31 December 2016

£'000

£'000

£'000

Revenue

135,134

129,580

250,489

Other operating income

133

219

325

135,267

129,799

250,814

Raw material and consumables

(22,838)

(22,007)

(39,291)

Other external charges

(73,048)

(75,286)

(143,564)

Employee costs

(33,799)

(28,403)

(58,738)

Depreciation of property, plant & equipment

(1,489)

(1,186)

(2,400)

Other operating charges

(2,768)

(2,294)

(4,580)

Operating profit

1,325

623

2,241

Finance costs

(105)

(111)

(179)

Profit before tax

1,220

512

2,062

Tax (Note 4)

(238)

(36)

572

Profit for the period

982

476

2,634

Other comprehensive income

-

-

-

Total comprehensive income for the period

982

476

2,634

Attributed to:-

Equity holders of the parent

982

476

2,634

982

476

2,634

Earnings per share basic and diluted (Note 3)

9.67p

4.69p

25.95p

Dividend per share (Note 5)

3.0p

1.5p

1.5p

Capital

Share

Merger

Redemption

Retained

Capital

Reserve

Reserve

Earnings

Total

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2016

1,015

455

20

8,727

10,217

Profit and total comprehensive income for the period

-

-

-

476

476

Dividends paid

-

-

-

-

-

Balance at 30 June 2016

1,015

455

20

9,203

10,693

Profit and total comprehensive income for the period

-

-

-

2,158

2,158

Dividends paid

-

-

-

(152)

(152)

Balance at 31 December 2016

1,015

455

20

11,209

12,699

Profit and total comprehensive income for the period

-

-

-

982

982

Dividends paid

-

-

-

(303)

(303)

Balance at 30 June 2017

1,015

455

20

11,888

13,378

30 June

31 December

2017

2016

2016

£'000

£'000

£'000

Assets

Non-Current Assets

Property, plant and equipment

14,975

13,011

 13,651

Deferred tax asset

1,201

705

1,411

16,176

13,716

15,062

Current Assets

Inventories

1,950

1,964

2,065

Construction contracts

18,048

15,801

19,165

Trade and other receivables

40,943

39,433

30,705

Cash and cash equivalents

7,925

2,878

11,405

68,866

60,076

63,340

Total Assets

85,042

73,792

78,402

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

11,888

9,203

11,209

Total Equity

13,378

10,693

12,699

Liabilities

Non-current Liabilities

Obligation under finance leases

- due after one year

2,703

2,004

1,785

Provisions

394

394

394

3,097

2,398

2,179

Current Liabilities

Trade & other payables

66,048

58,626

61,145

Current income tax payable

219

54

194

Obligations under finance leases

- due within one year

2,300

2,021

2,185

68,567

60,701

63,524

Total Liabilities

71,664

63,099

65,703

Total Equity & Liabilities

85,042

73,792

78,402

Six Months Ended 30 June

Year Ended

2017

2016

31 December

2016

£'000

£'000

£'000

Cash flows from operating activities

Operating profit

1,325

623

2,241

Adjustments for:

Depreciation of property, plant and equipment

1,489

1,185

2,400

Gain on disposal of property, plant and equipment

(130)

(215)

(317)

Increase in provisions

-

33

33

Operating cash flows before movements in

working capital

2,684

1,626

4,357

Decrease in inventories

115

371

270

Decrease/(increase) in construction contracts

1,117

1,736

(1,628)

(Increase)/decrease in receivables

(10,238)

(8,039)

690

Increase in payables

4,903

2,040

4,557

Cash (used in)/generated from operations

(1,419)

(2,266)

8,246

Income tax received

-

21

78

Interest paid

(105)

(111)

(61)

Net cash (used in)/generated from operating activities

(1,524)

(2,356)

8,263

Cash flows from investing activities

Purchase of property, plant and equipment

(444)

(477)

(1,303)

Proceeds on disposal of property, plant and equipment

132

353

475

Net cash used in financing activities

(312)

(124)

(828)

Cash flows from financing activities

Equity dividends paid

(303)

-

(152)

Repayments of obligations under finance leases

(1,341)

(1,263)

(2,381)

Interest payable under finance leases

-

-

(118)

Net cash used in financing activities

(1,644)

(1,263)

(2,651)

Net (decrease)/increase in cash and cash equivalents

(3,480)

(3,743)

4,784

Cash and cash equivalents at 1 January 2017

11,405

6,621

6,621

Cash and cash equivalents at 30 June 2017

7,925

2,878

11,405

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 that are effective for the full year ending 31 December 2016. 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 2016. The comparative figures for the year ended 31 December 2016 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.

The accounting policies adopted in the preparation of the unaudited condensed Group half-yearly financial statements to 30 June 2017 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2016. The Group has considered amendments to existing standards and interpretations that are effective for the year ending 31 December 2017 and is of the view that they have no impact on the unaudited condensed Group half-yearly accounts, except for as noted below with IFRS 15 'Revenue from Contracts with Customers'.

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 2016.

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 2016.

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 introduces a single, principles based, five-step model to measuring and recognising revenue from contracts with customers, based on the transfer of control of goods and services to customers. It replaces the separate models for goods, services and construction contracts currently included in IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related interpretations. IFRS 15 will be adopted by the Group with effect from 1 January 2018.

The Group is continuing to undertake its assessment of the impact of IFRS 15, through a review of existing major contracts. The quantitative impact of the initial application of IFRS 15 is not known or reasonably estimable at the time of preparation of these interim financial statements.

2.

Segment reporting

Business segments

The Group is composed of the following operating markets which are conducted in the UK and are effectively market sectors:

• Construction

• Power

• Highways

• Water

• Telecommunications

The Group manages its operating segments' trading performance and working capital by monitoring operating profit and centrally manages Group taxation, capital structure and expenditure including net equity and net debt.

Segment revenue and profit

Six Months Ended 30 June 2017

Construction

Power

Highways

Telecoms

Water

Total

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

External sales

11,201

7,468

21,297

18,039

77,129

135,134

Result before

corporate expenses

699

409

1,234

943

5,811

9,096

Corporate expenses

(621)

(560)

(975)

(911)

(4,704)

(7,771)

Operating profit/(loss)

78

(151)

259

32

1,107

1,325

Net finance costs

(105)

Profit before tax

1,220

Tax

(238)

Total comprehensive income for the period

982

Six Months Ended 30 June 2016

Construction

Power

Highways

Telecoms

Water

Total

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

External sales

11,593

13,827

20,038

15,469

68,653

129,580

Result before

corporate expenses

910

640

821

(852)

5,323

6,842

Corporate expenses

(662)

(513)

(603)

(707)

(3,734)

(6,219)

Operating profit/(loss)

248

127

218

(1,559)

1,589

623

Net finance costs

(111)

Profit before tax

512

Tax

(36)

Total comprehensive income for the period

476

Segment assets

30 June

2017

2016

£'000

£'000

Construction

8,765

11,464

Power

12,261

6,703

Highways

14,714

15,048

Telecommunications

21,911

17,081

Water

27,391

23,496

Total segment assets and consolidated total assets

85,042

73,792

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

2017

2016

2017

2016

£'000

£'000

£'000

£'000

Construction

154

124

290

163

Power

103

148

194

194

Highways

293

215

552

281

Telecommunications

248

166

467

217

Water

691

532

1,300

696

1,489

1,185

2,803

1,551

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 £52,346,000 (2016: £55,483,000) were derived from a single external customer. These revenues are attributable to the Power and Water segments.

3.

Earnings per share

The basic and diluted earnings per share are the same and have been calculated on profits of £982,000 (2016: profits of £476,000) and a weighted average number of shares in issue of 10,150,000 (2016: 10,150,000).

4.

Taxation

In respect of the six months ended 30 June 2017, the corporation tax effective rate was 19.5% (2016: 20%). A corporation tax provision has been included in relation to the taxable profits of the company.

5.

Dividends

Amounts recognised as distributions to equity holders in the half year:-

Six Months to June

2017

2016

£'000

£'000

Final dividend for the year ended 31 December 2016 of £3.0p (2015: £Nil) per share.

303

-

The Directors propose an interim dividend of 3.0p (2016: 1.5p) per share, total £305,000 (2016: £152,000), which will be paid on 15 September 2017 to the shareholders on the register at 18 August 2017.

6.

Related parties

The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers.

The Company previously advised that on 29 March 2017, SPARK Advisory Partners Limited ("SPARK"), the Company's sponsor (in respect of this matter only), notified the Financial Conduct Authority (the "FCA") of a breach of the Listing Rules in relation to the related party transactions. SPARK also notified the FCA that the Company has a "controlling shareholder" (being the Moyle family and its associates) for the purposes of the Listing Rules in respect of which there is no agreement in place as required by Listing Rule 9.

The Company has now received a formal response from the FCA in respect of these breaches of the Listing Rules. The FCA's review has now been concluded and they do not intend to take any further action in relation to these matters at the present time. The basis of the FCA's decision was due to the following confirmations having been made:

1. SPARK has confirmed to the FCA that the transactions entered into between the Company and Mr R Moyle were fair and reasonable as far as the shareholders of the Company were concerned; and

2. SPARK has confirmed to the FCA that 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

7.

Contingent liabilities

Lloyds Bank PLC, Aviva Insurance Limited and HCC International Insurance Co. Ltd have given Performance Bonds to a value of £9,360,000 (2016 : £6,521,000) 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 2016.

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.

J Homer

Chief Executive

D A Taylor

Group Finance Director