4th Apr 2011 07:00
NORTH MIDLAND CONSTRUCTION PLC
2010 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 2010.
Highlights from the results and the Chairman's Statement:-
Year ended 31 December 2010 £'000 | Year ended 31 December 2009 £'000 | |
Revenue Operating profit before exceptional items Exceptional items Profit before tax Profit for the year Earnings per share Dividends per share | 164,523 3,812 - 3,713 2,649 25.69p 8.50p | 144,185 3,348 (1,594) 1,554 597 4.40p 8.50p |
·; Revenue increased by 14.1% to £164.5 million.
·; Profit before tax and exceptional item £3.71 million, an increase of 17.9%.
·; Result of the appeal against the fine levied by the Office of Fair Trading is awaited.
·; Joint Venture project with Biwater Treatment Limited virtually completed with significant success.
·; Building subsidiary incurred losses due to low margins and shortage of Revenue.
·; Cash inflow of £2.7million during year.
·; Secured workload for 2011 at £140million.
·; The Group has numerous long term framework agreements in place.
·; Proposed final dividend of 6.0p (2009 - 6.0p) giving a full year dividend of 8.50p (2009 - 8.50p).
For further information:-
Robert Moyle, Chairman - 01623 518812
Michael Garratt, Finance Director - 01623 518816
Chairman's Statement
It is very gratifying to report a result both in excess of the forecast and that of the previous year, in spite of both the challenging economic climate and the severe weather conditions experienced at both the start and the end of the year. Revenue increased by 14.1% to £164.5 million and profit before exceptional items and tax by 17.9% to £3.71 million. Progress was not uniform across the Group and a breakdown of the result is now provided by division and subsidiary.
Civil Engineering
The market remains extremely competitive with reduced tender opportunities due to public sector cutbacks and very tight credit conditions. Framework clients are also demanding year on year savings. However, the division and most notably the sub-division NMC/Nomenca, formed to service the AMP5 framework for Severn Trent Water delivered an enhanced performance with revenue increasing by 1.2% to £51.2 million and profitability to £1.96 million. The major joint venture project at Minworth with Biwater Treatment Limited was virtually completed during the year and the exceptional performance delivered significant final bonus payments on the completed sections. Forecasted expenditure levels on the AMP5 framework for NMC/Nomenca were met and the sub-division achieved a result in excess of budget by delivering cost reduction due to increased efficiency and innovation. Outside of the water frameworks the core areas of operation, namely power, waste and rail, remain extremely competitive with two contracts in the power sector producing losses during the year. Tender opportunities and repeat business remain scarce, but the existing frameworks, allied to the recently obtained Anglian Water LDP framework, should lead to future forecasts being achievable.
Highways
The division successfully grew during the year on the back of increased expenditure with major local government frameworks such as Liverpool City Council and the development of new markets. Revenue increased by 32.3% to £13.5 million with profitability marginally increasing by 3.8% to £0.22 million. Contracts are being secured at extremely competitive margins, but are still delivering returns. The division has developed a particular expertise and reputation in public realm contracts and to date these do not seem to have been affected by public sector cutbacks. Projects of increasingly higher value are being secured and the division enters the New Year with a healthy order book and revenue is expected to exceed that of the previous year.
Utilities
Backed by high demand for broadband, the telecommunications sector was particularly buoyant during the year and as the division services most of the major companies, it was the beneficiary. Revenue increased by 32.2% to £40.2 million and profitability by 4.1 % to £1.46 million. The major contributor to this increased revenue was the South Yorkshire Digital contract for Kcom plc. However, work in progress increased significantly as the contract payment was based upon a series of large milestones. To satisfy demand and provide an improved customer service, an in-house cabling and jointing capability was formed and this has been particularly successful. Demand for new and improved networks remains high and due to the wide range of clients served, the division is well placed to capitalise upon this in the future.
Building
The building subsidiary continues to be the most affected by the continuing economic downturn and, therefore, returned a loss in excess of that forecasted of £0.57 million on a Revenue of £22.0 million. Revenue was 37% below budget due to poor weather at both the commencement and the end of the year and reduced progress on the major scheme in the current portfolio. Margins remain positive, but at an extremely low level, and this coupled with the low Revenue has contributed to the loss. A thorough review of the business has now been undertaken and further overhead reduction instigated along with a revised marketing strategy. The division enters 2011 with an order book of £20 million and tender opportunities are now on the increase. Brian Evans, the Chairman and Co-founder of the company, who was also a PLC Board member, retired at the end of the year. Special thanks go to him for all his endeavour and loyalty in the creation and growth of the company.
Nomenca
The mechanical and electrical subsidiary has been particularly successful in the AMP5 tendering process for water companies throughout the country. However, unfortunately that success did not translate into orders received during the year with the transition from the previous AMP being very slow. Revenue, therefore, declined by 12.8% to £37.6 million and profitability by 20% to £0.75 million. The problem was particularly acute in Scotland, where significant reductions in operating costs had to be introduced. Several outstanding accounts were resolved during the year and this resulted in a positive cash flow. The division enters the current financial year with a secured order intake of £44 million and this, coupled with the foundation of the frameworks secured, particularly in the water sector, will provide positive growth.
The Group has made huge advances in non-financial performance in recent years and the "Just Culture" initiative has driven improved health and safety and environmental performance. Overall, accidents were at an all-time low and there have been no statutory reportable accidents since September 2009, which is a notable achievement. In recognition of this, the Group has won six awards for Health & Safety and seven for Environmental Performance during the year. The Group takes its Corporate Social Responsibility (CSR) very seriously and several projects were undertaken either under the aegis of "Business in the Community" or under its own initiative. The "Investors in People" accreditation was also reviewed during the year and uplifted to a silver standard. This truly reflects the Group's commitment to its employees' training and well being. Full details of the year's performance are contained in this year's CSR report.
In the 2009 accounts an exceptional item was included for the potential OFT fine and associated costs of £1.594 million. An appeal was made against this and to date the result of that appeal has not been forthcoming. The first tranche of appeal decisions have just been announced and it would be presumptuous to assume that they will be replicated across the full range of appellants, but they do display significant reductions in the overall fines.
As previously stated, Brian Evans retired from the Board at the end of the year and as announced on Friday 1 April 2011 David Rogers has been appointed as a Non-Executive Director. We are delighted with his appointment and look forward to a close working relationship.
The secured order book for the current financial year is circa £140 million. Banking facilities have been renewed until March 2012 and the forecast is that cash flow will be maintained during the year. These key parameters enable your Board to recommend a final dividend of 6.0 pence, making a total of 8.5 pence for the year.
Group statement of comprehensive income for the year ended 31 December 2010
| Year Ended |
| Year Ended |
| 31 December 2010 |
| 31 December 2009 |
| £'000 |
| £'000 |
Revenue | 164,523 |
| 144,185 |
Operating profit before exceptional items | 3,812 |
| 3,348 |
Exceptional items (Note 3) | - |
| (1,594) |
Operating profit | 3,812 |
| 1,754 |
Interest received | 9 |
| 17 |
Finance costs | (108) |
| (217) |
Profit before tax | 3,713 |
| 1,554 |
Tax | (1,064) |
| (957) |
Profit for the year | 2,649 |
| 597 |
Other comprehensive income | - |
| - |
Total comprehensive income for the year | 2,649 |
| 597 |
Attributable to:- |
|
|
|
Non-controlling interests | 131 |
| 166 |
Equity holders of the Company | 2,518 |
| 431 |
Earnings per share (basic and diluted) | 25.69p |
| 4.40p |
|
|
|
|
Amount of actual final dividend on ordinary shares proposed to the shareholders on the register at the close of business on 26 April 2011, which will be paid on 26 May 2011. |
6.00p |
|
6.00p |
The calculation of earnings per share is based on 9,800,000 shares (2009 : 9,800,000) being the number of shares in issue throughout the period and on a profit attributable to the equity shareholders of the parent of £2,518,000 (2009 : £431,000).
Group statement of changes in equity
Share Capital
£'000 | Capital Redemption Reserve £'000 | Retained Earnings
£'000 | Non- Controlling Interest £'000 | Total
£'000 | |||||
Balance at 31 December 2009 | 980 | 20 | 17,805 | 654 | 19,459 | ||||
Profit attributable to the shareholders | - | - | 431 | - | 431 | ||||
Non-controlling interests | - | - | - | 166 | 166 | ||||
Dividends paid (note 6) | - | - | (833) | - | (833) | ||||
Dividend paid to non-controlling interests | - | - | - | (100) | (100) | ||||
Balance at 31 December 2009 | 980 | 20 | 17,403 | 720 | 19,123 | ||||
Profit attributable to shareholders | - | - | 2,518 | - | 2,518 | ||||
Non-controlling interests | - | - | - | 131 | 131 | ||||
Dividends paid (note 6) | - | - | (833) | - | (833) | ||||
Dividend paid to non-controlling interests | - | - | - | (103) | (103) | ||||
Acquisition of non-controlling interests | - | - | (230) | (249) | (479) | ||||
Balance at 31 December 2010 | 980 | 20 | 18,858 | 499 | 20,357 |
Group balance sheet as at 31 December 2010
|
| 2010 £'000 |
| 2009 £'000 |
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
| 10,234 |
| 9,714 |
Goodwill |
| 1,267 |
| 1,267 |
|
| 11,501 |
| 10,981 |
Current assets |
|
|
|
|
Inventories |
| 1,939 |
| 1,577 |
Construction contracts |
| 12,293 |
| 8,430 |
Trade and other receivables |
| 28,735 |
| 31,020 |
Cash and cash equivalents |
| 8,911 |
| 6,173 |
|
| 51,878 |
| 47,200 |
Total assets |
| 63,379 |
| 58,181 |
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Capital and reserves attributable to equity holders of the Parent |
|
|
|
|
Share capital |
| 980 |
| 980 |
Capital redemption reserve |
| 20 |
| 20 |
Retained earnings |
| 18,858 |
| 17,403 |
|
| 19,858 |
| 18,403 |
Non-controlling interests |
| 499 |
| 720 |
Total equity |
| 20,357 |
| 19,123 |
|
|
|
|
|
Liabilities |
|
|
|
|
Non-current liabilities |
|
|
|
|
Obligations under finance leases |
| 858 |
| 271 |
Provisions |
| 560 |
| 519 |
Deferred tax |
| 15 |
| 38 |
|
| 1,433 |
| 828 |
Current liabilities |
|
|
|
|
Trade and other payables |
| 39,761 |
| 36,940 |
Current income tax payable |
| 1,088 |
| 621 |
Obligations under finance leases |
| 740 |
| 669 |
|
| 41,589 |
| 38,230 |
Total liabilities |
| 43,022 |
| 39,058 |
Total equity and liabilities |
| 63,379 |
| 58,181 |
Group statement of cash flows for the year ended 31 December 2010
| 2010 £'000 |
| 2009 £'000 |
Cash flows from operating activities |
|
|
|
Operating profit | 3,812 |
| 1,754 |
Adjustment for:- |
|
|
|
Depreciation of property, plant and equipment | 1,647 |
| 1,633 |
Gain on disposal of property, plant and equipment | (87) |
| (179) |
Increase in reinstatement reserve | 41 |
| 23 |
Operating cash flows before movement in working capital | 5,413 |
| 3,231 |
(Increase) in inventories | (362) |
| (96) |
(Increase)/decrease in construction contracts | (3,863) |
| 1,411 |
Decrease in receivables | 2,285 |
| 17,636 |
Increase/(decrease) in payables | 2,821 |
| (9,032) |
Cash generated from operations | 6,294 |
| 13,150 |
Income Tax (paid) | (621) |
| (1,265) |
Interest received | 9 |
| 17 |
Interest paid | (108) |
| (217) |
Net cash generated from operating activities | 5,574 |
| 11,685 |
Cash flows from investing activities |
|
|
|
Purchase of property, plant and equipment | (634) |
| (246) |
Proceeds on disposal of property, plant and equipment |
108 |
|
286 |
Purchase of non-controlling interests | (478) |
| - |
Net cash (used in)/generated from investing activities | (1,004) |
| 40 |
Cash flows from financing activities |
|
|
|
Equity dividends paid | (833) |
| (833) |
Dividends paid to non-controlling interests | (103) |
| (100) |
Repayment of obligations under finance leases | (896) |
| (1,055) |
Net cash used in financing activities | (1,832) |
| (1,988) |
Net Increase in cash and cash equivalents | 2,738 |
| 9,737 |
Cash and cash equivalents/(bank overdrafts) at 1 January 2010 |
6,173 |
|
(3,564) |
Cash and cash equivalents at 31 December 2010 |
8,911 |
|
6,173 |
1. | Basis of preparation |
The condensed Group financial statements for the year ended 31 December 2010 included in this report do not constitute the Group's statutory accounts for the year ended 31 December 2010, but are derived from those accounts. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 or equivalent preceding legislation. | |
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 (IFRS's), this announcement does not itself contain sufficient information to comply with IFRS's. | |
| |
The condensed Group financial statements have been prepared on a basis consistent with that adopted in the previous year's published and in accordance with IFRSs. | |
The Group expects to publish full financial statements that comply with both IFRS's as adopted for use in the European Union and IFRS's as compliant with the Companies Act 2006 and Article 4 of the EU IAS Regulations. | |
The condensed financial statements were approved by the Board on 1 April 2011. | |
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 civil engineering, highways and utilities divisions - Building - construction of commercial and residential property - Nomenca - mechanical and electrical engineering products and services
Segment revenue and profit |
Year Ended 31 December 2010 | |||||||||||
Civil Engineering | Highways | Utilities | Building | Nomenca | Total | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Revenue | |||||||||||
External sales | 51,182 | 13,492 | 40,223 | 22,049 | 37,577 | 164,523 | |||||
Result before Corporate expenses |
3,883 |
881 |
2,272 |
980 |
3,841 |
11,857 | |||||
Corporate expenses | (1,930) | (664) | (808) | (1,554) | (3,089) | (8,045) | |||||
Operating profit/(loss) before exceptional items |
1,953 |
217 |
1,464 |
(574) |
752 |
3,812 | |||||
Exceptional item (Note 3) | - | ||||||||||
Operating profit | 3,812 | ||||||||||
Interest received | 9 | ||||||||||
Net finance costs | (108) | ||||||||||
Profit before tax | 3,713 | ||||||||||
Tax | (1,064) | ||||||||||
Profit for the year | 2,649 | ||||||||||
Year Ended 31 December 2009 | |||||||||||
Civil Engineering | Highways | Utilities | Building | Nomenca | Total | ||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
Revenue | |||||||||||
External sales | 50,575 | 10,195 | 30,417 | 9,885 | 43,113 | 144,185 | |||||
Result before Corporate expenses | 3,292 | 959 | 2,915 | 1,604 | 3,570 | 12,340 | |||||
Corporate expenses | (2,651) | (750) | (1,509) | (1,456) | (2,626) | (8,992) | |||||
Operating profit before exceptional item |
641 |
209 |
1,406 |
148 |
944 |
3,348 | |||||
Exceptional item (Note 3) | (1,594) | ||||||||||
Operating profit | 1,754 | ||||||||||
Interest received | 17 | ||||||||||
Net finance costs | (217) | ||||||||||
Profit before tax | 1,554 | ||||||||||
Tax | (957) | ||||||||||
Profit for the year | 597 | ||||||||||
Segment assets | |||
2010 | 2009 | ||
£'000 | £'000 | ||
Civil Engineering | 22,697 | 20,254 | |
Highways | 5,983 | 4,083 | |
Utilities | 17,837 | 12,181 | |
46,517 | 36,518 | ||
Building | 6,674 | 7,780 | |
Nomenca | 10,188 | 13,883 | |
Total segment assets and consolidated total assets | 63,379 | 58,181 | |
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 |
| ||||||
2010 | 2009 | 2010 | 2009 |
| ||||
£'000 | £'000 | £'000 | £'000 |
| ||||
Civil Engineering | 773 | 867 | 1,049 | 234 |
| |||
Highways | 204 | 175 | 276 | 47 |
| |||
Utilities | 607 | 522 | 824 | 141 |
| |||
Building | 35 | 41 | 36 | 14 |
| |||
Nomenca | 28 | 28 | 3 | 4 |
| |||
1,647 | 1,633 | 2,188 | 440 |
| ||||
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 £49,466,000 (2009 : £44,208,000) were derived from a single external customer. These revenues are attributable to the Civil Engineering and Nomenca segments. |
3. | Exceptional item | |||
The exceptional item in 2009 relates to a fine levied by the Office of Fair Trading following their investigation into the construction industry. The Group strongly refute these allegations and after taking legal advice have appealed against the decision. The appeal was heard on 9 July 2010 and the decision is awaited. | ||||
4. | Earnings per share | |||
The basic and diluted earnings per share are the same and have been calculated on profits attributable to the holders of equity in the parent company of £2,518,000 (2009 : £431,000) and 9,800,000 shares in issue. | ||||
5. | Taxation | |||
In respect of the year ended 31 December 2010, corporation tax has been provided at 28% (2009 : 28%) of the taxable profit. | ||||
6. | Dividends | |||
Amounts recognised as distributions to equity holders in the year:- | ||||
2010 | 2009 | |||
£'000 | £'000 | |||
Final dividend for the year ended 31 December 2009 of 6p (2008 : 6p) per share | 588 | 588 | ||
Interim dividend for the year ended 31 December 2010 of 2.5p (2009 : 2.5p) per share | 245 | 245 | ||
833 | 833 | |||
The directors propose a final dividend of 6p per share (2009 : 6p per share), total £588,000 (2009 : £588,000). The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. | ||||
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. | ||||
Additionally, the Group has a 50% interest in a joint operation with Biwater Treatment Limited. | ||||
The condensed Group financial statements for the year ended 31 December 2010 incorporate the following relating to the joint operation:- | ||||
Year ended | Year ended | |||
31 December 2010 | 31 December 2009 | |||
£'000 | £'000 | |||
Revenue | 4,824 | 15,006 | ||
Expenses | 2,509 | 13,370 | ||
Assets | 277 | 2,648 | ||
Liabilities | 277 | 2,648 | ||
8. | Contingent liabilities | |||
Euler Hermes Guarantee plc, Lloyds TSB and HCC International Insurance Company Plc have given Performance Bonds to a value of £3,111,000 (2009 : £5,467,685) on the Group's behalf. These bonds have been made with recourse to the Group. | ||||
9. | The Annual Report and Accounts for the year ended 31 December 2010 will be despatched to shareholders on 4 May 2011 and will be available on the Company's website - www.northmid.co.uk. | |||
10. | The Annual General Meeting will be held on Thursday 26 May 2011 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