28th Mar 2014 11:53
NORTH MIDLAND CONSTRUCTION PLC
2013 UNAUDITED PRELIMINARY RESULTS
North Midland Construction PLC ("the Company"), the UK provider of civil engineering, building, mechanical and electrical services to public and private organisations, announces preliminary results for the year ended 31 December 2013.
Highlights from the results:-
Year ended 31 December 2013 £'000 | Year ended 31 December 2012 £'000 | |
Revenue Operating (loss)/profit (Loss)/profit before tax Total comprehensive (loss)/income for the year (Loss)/earnings per share | 177,555 (5,855) (5,972) (5,901) (58.14p) | 168,928 775 710 536 4.75p |
· Revenue increased by 5.11% to £177.56 million.
· Loss before tax £5.97 million.
· Losses of £9.55 million in the Building and Civil Engineering division as a result of further delays and cost overruns on problematic contracts and unfavourable commercial contract settlements due to client financial instability.
· Building and Civil Engineering division completely restructured.
· Utilities division returns to profitability.
· Strong performance in the water businesses (Nomenca and NMCNomenca), with further combined increases in revenues and profitability.
· The E5 Joint Venture with three other framework contractors is circa 77% complete and the projected outturn remains encouraging.
· AMP 6 framework with Severn Trent Water secured.
· 80% of Group revenues derived from frameworks going forward.
· Secured workload for 2014 at circa £150 million.
· Cash position remains strong. Year end balance of £4.88 million.
For further information:-
Robert Moyle, Chairman - 01623 518812
Daniel Taylor, Finance Director - 01623 515008
OPERATIONAL PERFORMANCE
UTILITIES:-
Increased activity in the telecommunications sector, due to an escalation in the roll-out of broadband, and the power sector, contributed to an increase in revenue of 21.3% to £19.71 million (2012: £16.25 million). This resulted in a return to profitability with operating profit of £0.22 million (2012: £0.50 million loss).
The division currently executes framework contracts for BT, Carillion/Telent, Electricity North West, Vodafone and KCom and revenue levels are in line with forecast. The division has successfully completed a £1.18 million individual project in Yorkshire for KCom early, and work continues on the Nottingham Tram Extension and A453 dualling.
An order from City Fibre Holding Ltd has recently been received for the construction of the Peterborough Metro Network, valued at circa £4.30 million. This will commence in April 2014 for completion this calendar year.
NMCNOMENCA:-
The division has had an exceptional year delivering operating profit of £2.46 million (2012: £1.91 million) on revenue of £79.62 million (2012: £56.86 million). This is the first year that the division is reporting as an individual entity.
The division is currently engaged on AMP5 frameworks for both Severn Trent and Anglian Water and individual water related projects. It is also a member of the E5 consortium, which is engaged on the £200 million programme of major projects for Severn Trent Water. At 31 December 2013 the programme was approximately 77% complete and the projected outturn remains encouraging.
The division continues to deliver exceptional service and innovative cost reduction solutions to its clients. As testament to this, Severn Trent Water has reappointed NMCNomenca as a partner to deliver its 2015-2020 investment programme (AMP6 - Asset Management Period Number Six). This appointment maintains the relationship between the two companies that has been established over many years. It will also underpin both revenue and growth going forward for the next five years.
BUILDING & CIVIL ENGINEERING:-
Failure to achieve budgeted revenue, coupled with further delays in the completion of two major problematical contracts and the unfavourable settlement of old projects where reduced payment was accepted to avoid the potential risk of client commercial failure, has resulted in an operating loss of £9.55 million (2012: £1.14 million) on a revenue of £26.06 million (2012: £32.45 million).
The division has been totally restructured and the risk profile of new contracts has been reduced. Significant claims for losses on the problematical contracts are currently being completed and pursued, but conclusion will not be achieved until completion has been finalised. The market remains extremely competitive, but the level of enquiries is increasing.
Operational performance has improved, as a result of the restructure and the ongoing projects, which are now predominantly in the power and construction sector, have returned to profit at site level. The emphasis going forward is to secure blue chip clients with a high level of repeat business. This strategy has been successful with East Midlands Housing Association for whom two projects in Leicester valued at £1.9 million have recently been secured.
HIGHWAYS:-
As previously reported, due to the retirement of Senior Executive Directors, the Highways & Utilities divisions were merged into one division, operating as two work streams, under one senior management team. This has resulted in both cost savings and increased operational efficiency.
Public expenditure cutbacks were maintained during the year and activity on the existing secured frameworks was generally reduced and in some cases non-existent. This resulted in a nominal increase in revenue to £12.82 million (2012: £12.71 million) over the previous year's significantly reduced level. Operating profit, however, increased by 55.6% to £0.22 million (2012: £0.14 million). The division also incurred a bad debt on a major development project, which is included in the result.
As a result of the successful consolidation of the geographical expansion previously undertaken and increased levels of public expenditure now coming on stream, the current level of secured orders is £21 million. £17 million of this amount is to be constructed in 2014 and the balance in the following year. This, coupled with the higher value of contracts that the division, on the back of past performance, is now being considered for, leads to optimism for the future.
NOMENCA:-
The mechanical and electrical subsidiary delivered a creditable result for the year with profitability of £0.79 million (2012: £0.37 million) on a revenue of £39.35 million (2012: £50.66 million).
Circa 90% of Nomenca's revenue is generated from frameworks and the subsidiary is currently actively engaged on twenty one different framework contracts throughout the country.
There has been another good year of growth in the design services capability, most particularly in supplying whole life cost efficient designs to the water and mining industries. The St Austell office is currently supporting an Australian company, G R Engineering Services Limited, in the design for a proposed new tungsten mine near Plymouth.
Nomenca is also engaged in manufacturing steelwork and chemical dosing plant for the water industry. The steel fabrication operation has grown well this year and has recently been successful in securing a five year access steelwork framework for Yorkshire Water.
The development of the in-house capability to serve clients' repair and maintenance requirements has continued and is viewed as a key area of expansion for the future. To secure the Environment Agency MEICA Planned and Reactive Maintenance Contract for the North of England for the next five years, at a value of circa £4 million per annum, is particularly pleasing.
Nomenca has developed an enviable reputation for both design and operational delivery in both the water and water related sectors. The future prospects for growth, built off the back of this, are very promising.
DIVIDENDS
Due to the loss reported, the Directors do not recommend a final dividend for the year ended 31 December 2013 (2012: 3p per share, total £305,000).
OUTLOOK
The secured order book for the current financial year is circa £150 million and at this stage only includes firm orders placed under the framework contracts. These orders are expected to increase and there is good visibility of the projected level of expenditure on the major frameworks.
The restructuring of the Building and Civil Engineering division, coupled with the completion of the two major problematical contracts, along with the expansion of the water business and improving market conditions, leads to confidence in a return to profitability in the next financial year.
Group Statement of Comprehensive Income (unaudited)
Year Ended | Year Ended | ||
31 December 2013 | 31 December 2012 | ||
£'000 | £'000 | ||
Revenue | 177,555 | 168,928 | |
Operating (loss)/profit | (5,855) | 775 | |
Interest received | 4 | 12 | |
Finance costs | (121) | (77) | |
(Loss)/profit before tax | (5,972) | 710 | |
Tax | 71 | (174) | |
(Loss)/profit for the year | (5,901) | 536 | |
Other comprehensive income | - | - | |
Total comprehensive income for the year | (5,901) | 536 | |
Attributable to:- | |||
Non-controlling interests | - | 63 | |
Equity holders of the Company | (5,901) | 473 | |
(Loss)/earnings per share (basic and diluted) | (58.14p) | 4.75p | |
Final dividend proposed (per share) | - | 3.00p |
Earnings per share, both basic and diluted, is calculated on the loss attributable to equity holders of the parent of £5,901,000 (2012: profit £473,000) and the weighted average of 10,150,000 (2012: 9,959,699) shares in issue during the year.
Group statement of changes in equity (unaudited)
Share Capital £'000 | Merger Reserve £'000 | Capital Redemption Reserve £'000 | Retained Earnings £'000 | Non- controlling interest £'000 | Total £'000 | |
Balance at 1 January 2012 | 980 | - | 20 | 17,268 | 573 | 18,841 |
Profit and total comprehensive income for the year | - | - | - | 473 | 63 | 536 |
Dividends paid | - | - | - | (446) | - | (446) |
Dividend paid to non-controlling interest | - | - | - | - | (43) | (43) |
Acquisition of non-controlling interest | - | - | - | (520) | (593) | (1,113) |
Shares issued | 35 | 455 | - | - | - | 490 |
Balance at 31 December 2012 | 1,015 | 455 | 20 | 16,775 | - | 18,265 |
Profit and total comprehensive income for the year | - | - | - | (5,901) | - | (5,901) |
Dividends paid | - | - | - | (407) | - | (407) |
Balance at 31 December 2013 | 1,015 | 455 | 20 | 10,467 | - | 11,957 |
Group balance sheet as at 31 December 2013 (unaudited)
| 2013 | 2012 | |
£'000 | £'000 | ||
Assets | |||
Non-current assets | |||
Property, plant and equipment | 10,984 | 10,622 | |
Investments in subsidiaries | - | - | |
Deferred tax asset | 103 | 77 | |
11,087 | 10,699 | ||
Current assets | |||
Inventories | 1,529 | 1,496 | |
Construction contracts | 16,214 | 16,768 | |
Trade and other receivables | 30,692 | 32,403 | |
Current income tax receivable | 33 | - | |
Cash and cash equivalents | 4,877 | 5,065 | |
53,345 | 55,732 | ||
Total assets | 64,432 | 66,431 | |
Equity and liabilities | |||
Capital and reserves attributable to equity holders of the Parent | |||
Share capital | 1,015 | 1,015 | |
Merger reserve | 455 | 455 | |
Capital redemption reserve | 20 | 20 | |
Retained earnings | 10,467 | 16,775 | |
Total equity | 11,957 | 18,265 | |
Liabilities | |||
Non-current liabilities | |||
Obligations under finance leases | 685 | 877 | |
Provisions | 242 | 350 | |
927 | 1,227 | ||
Current liabilities | |||
Trade and other payables | 50,782 | 45,898 | |
Current income tax payable | - | 115 | |
Obligations under finance leases | 766 | 926 | |
51,548 | 46,939 | ||
Total liabilities | 52,475 | 48,166 | |
Total equity and liabilities | 64,432 | 66,431 |
Group statement of cash flows for the year ended 31 December 2013 (unaudited)
2013 | 2012 | |
£'000 | £'000 | |
Cash flows from operating activities | ||
Operating (loss)/profit | (5,855) | 775 |
Adjustment for: | ||
Depreciation of property, plant and equipment | 1,711 | 1,627 |
Gain on disposal of property, plant and equipment | (30) | (77) |
(Decrease)/increase in reinstatement reserve | (108) | (229) |
Operating cash flows before movement in working capital | (4,282) | 2,096 |
(Increase)/decrease in inventories | (33) | 55 |
Decrease/(increase) in construction contracts | 554 | (4,581) |
Decrease/(Increase) in receivables | 1,711 | (339) |
Increase in payables | 4,884 | 1,319 |
Cash generated/(used in) from operations | 2,834 | (1,450) |
Income Tax (paid)/received | (103) | - |
Interest received | 4 | 12 |
Interest paid | (121) | (77) |
Net cash generated from / (used in) operating activities | 2,614 | (1,515) |
Cash flows from investing activities | ||
Purchase of property, plant and equipment | (1,472) | (634) |
Proceeds on disposal of property, plant and equipment | 56 | 99 |
Purchase of non-controlling interest | - | (623) |
Net cash (used in) investing activities | (1,416) | (1,158) |
Cash flows from financing activities | ||
Equity dividends paid | (407) | (446) |
Dividends paid to non-controlling interest | - | (43) |
Repayment of obligations under finance leases | (979) | (1,002) |
Net cash (used in) financing activities | (1,386) | (1,491) |
Net decrease in cash and cash equivalents | (188) | (4,164) |
Cash and cash equivalents at 1 January 2013 | 5,065 | 9,229 |
Cash and cash equivalents at 31 December 2013 | 4,877 | 5,065 |
Cash and cash equivalents comprise funds held at the bank which are immediately accessible.
1. | Basis of preparation |
The condensed Group financial statements for the year ended 31 December 2013 included in this report do not constitute the Group's statutory accounts for the year ended 31 December 2013, or the year ended 31 December 2012. The results for 2013 are unaudited. | |
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. | |
The condensed Group financial statements have been prepared on a basis consistent with that adopted in the previous year's published financial statements and in accordance with IFRSs. | |
The Group expects to publish statutory financial statements for the year ended 31 December 2013 that comply with both IFRSs as adopted for use in the European Union and IFRSs as compliant with the Companies Act 2006 and Article 4 of the EU IAS Regulations based on the information presented in this announcement. The independent Auditors' Report will be based on those statutory accounts once they are complete. | |
The condensed financial statements were approved by the Board on 27 March 2014. | |
Audited statutory accounts for the year ended 31 December 2012 have been delivered to the registrar of companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2012 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. | |
2. | Segment reporting |
The business segment reporting format reflects the Group's management and internal reporting structure.
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
Year ended 31 December 2013
Building | Highways | Utilities | NMCNomenca | Nomenca | Total | |
& Civil | ||||||
Engineering | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | ||||||
External sales | 26,064 | 12,816 | 19,709 | 79,620 | 39,346 | 177,555 |
Result before corporate expenses | (9,266) | 465 | 681 | 5,518 | 2,624 | 22 |
Corporate expenses | (282) | (244) | (461) | (3,055) | (1,835) | (5,877) |
Operating profit/(loss) | (9,548) | 221 | 220 | 2,463 | 789 | (5,855) |
Net finance costs | (117) | |||||
Loss before tax | (5,972) | |||||
Tax | 71 | |||||
Loss for the year | (5,901) |
In the previous period the NMCNomenca segment was reported 50% within Building and Civil Engineering and 50% within the Nomenca segment. The 2012 comparative figures have been restated to show the NMC Nomenca segment separately to allow comparison.
The Highways & Utilities divisions were merged into one division under one senior management team in 2013 but are still monitored and reported as separate segments. |
Year ended 31 December 2012 (restated to show NMCNomenca as a separate segment)
Building | Highways | Utilities | NMCNomenca | Nomenca | Total | |
& Civil | ||||||
Engineering | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | ||||||
External sales | 32,453 | 12,706 | 16,251 | 56,862 | 50,656 | 168,928 |
Result before corporate expenses | (545) | 779 | (32) | 4,282 | 2,748 | 7,232 |
Corporate expenses | (597) | (637) | (469) | (2,372) | (2,382) | (6,457) |
Operating profit | (1,142) | 142 | (501) | 1,910 | 366 | 775 |
Net finance costs | (65) | |||||
Profit before tax | 710 | |||||
Tax | (174) | |||||
Profit for the year | 536 |
Segment assets (2012 restated to show NMCNomenca as a separate segment)
2013 £'000 | 2012 £'000 | |
Building and Civil Engineering | 20,210 | 31,368 |
Highways | 4,633 | 9,541 |
Utilities | 14,145 | 7,460 |
NMCNomenca | 8,491 | 8,755 |
Nomenca | 16,953 | 9,307 |
Total segment assets and consolidated total assets | 64,432 | 66,431 |
For the purpose of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible and financial assets attributable to each segment. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments. |
.
Other segment information
| Depreciation and amortisation | Additions to non-current assets | ||
2013 £'000 | 2012 £'000 | 2013 £'000 | 2012 £'000 | |
Building and Civil Engineering | 323 | 1,085 | 396 | 1,132 |
Highways | 159 | 226 | 195 | 236 |
Utilities | 244 | 290 | 299 | 302 |
NMCNomenca | 967 | - | 1,209 | - |
Nomenca | 18 | 26 | - | 28 |
1,711 | 1,627 | 2,099 | 1,698 | |
| There were no impairment losses recognised in respect of property, plant and equipment. All of the above relates to continuing operations and arose in the United Kingdom.
The results of each segment are not materially affected by seasonality.
| ||||||
3. |
Information about major customer
Revenues of approximately £68,800,000 (2012: £40,400,000) were derived from a single external customer. These revenues are attributable to the NMC Nomenca and Nomenca segments.
| ||||||
4. | Earnings per share | ||||||
Earnings per share, both basic and diluted, is calculated on the loss attributable to equity holders of the parent of £5,901,000 (2012: profit £473,000) and the weighted average of 10,150,000 (2012: 9,959,699) shares in issue during the year. | |||||||
5. | Taxation | ||||||
In respect of the year ended 31 December 2013, as a result of the pre-tax losses no corporation tax is payable (2012: provided at 24.5% of the taxable profit). The tax credit in the period arises from a carry back of tax losses and a deferred tax asset arising from short term timing differences. There are trading losses carried forward of £5,686,000 (2012: £Nil), a deferred tax asset relating to the losses has not been recognised. | |||||||
6. | Dividends | ||||||
Amounts recognised as distributions to equity holders in the year:- | |||||||
2013 | 2012 | ||||||
£'000 | £'000 | ||||||
Final dividend for the year ended 31 December 2012 of 3p (2011: 3p) per share | 305 | 294 | |||||
Interim dividend for the year ended 31 December 2013 of 1.0p (2012: 1.5p) per share | 102 | 152 | |||||
| 407 | 446 | |||||
7. | Related parties and joint operations | ||||||
The Group's related parties are key management personnel who are the executive directors, non-executive directors and divisional managers. The only transactions with these individuals comprise remuneration under service contracts. | |||||||
Additionally, the Group has a 25% interest in a joint operation with MWH Treatment Limited, Mott MacDonald Bentley Limited and Costain Limited. | |||||||
The condensed Group financial statements for the year ended 31 December 2013 incorporate the following relating to the joint operations:- | |||||||
Year ended | Year ended | ||||||
31 December 2013 | 31 December 2012 | ||||||
£'000 | £'000 | ||||||
Revenue | 17,500 | 12,483 | |||||
Expenses | 16,243 | 11,828 | |||||
Assets | 937 | 266 | |||||
Liabilities | 937 | 266 | |||||
8. | Share capital | ||||||
2013 | 2012 | ||||||
£'000 | £'000 | ||||||
Authorised:- | |||||||
12,500,000 ordinary shares of 10p each | 1,250 | 1,250 | |||||
Allotted, issued and fully paid:- | |||||||
10,150,000 (2012 - 10,150,000) ordinary shares of 10p | 1,015 | 1,015 | |||||
9. | Contingent liabilities | ||||||
Aviva Insurance Limited, Lloyds TSB Bank PLC, Euler Hermes Europe S.A. (N.V.) and HCC International Insurance Company Plc have given Performance Bonds to a value of £4,533,973 (2012: £5,592,000) on the Group's behalf. These bonds have been made with recourse to the Group. | |||||||
10. | The Annual Report and Accounts for the year ended 31 December 2013 will be despatched to shareholders on 25 April 2014 and will be available on the Company's website - www.northmid.co.uk. | ||||||
11. | The Annual General Meeting will be held on Thursday 22 May 2014 at 12.00 noon at the Group's Head Office at Nunn Close, The County Estate, Huthwaite, Sutton-in-Ashfield, Nottinghamshire NG17 2HW. | ||||||
Related Shares:
NMCN.L