Trading & Board Change Update

23 December 2020

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

NMCN PLC

("nmcn" or "the Company" or "the Group")

Trading & Board Change Update

Overview

Further to our announcement of 15 October 2020, which indicated that the Group was likely to report losses of between £13.5 million and £15.0 million this year, the nmcn Board is able to confirm that it expects that the Group will report losses before tax of circa £16.5 million.

An investigation has verified, subject to audit, that these include £5.3 million of prior year contract adjustments pre-tax, to five contracts within the Water business, relating to errors which should have been identified and corrected at the reporting date and information affecting estimates which should have been available. Profit before tax for the year ended 31 December 2019 will therefore be restated to £2.1 million from £7.4 million. Consequently, loss before tax for the current year is expected to be about £11.2 million, including £1.2 million for the final settlement of the last remaining legacy contract. The majority of the net cash flows associated with the forecast loss have already been incurred and the loss to be reported will have limited further impact on the Group's current cash position.

In addition to the prior year adjustments a number of difficult contracts are being brought to a conclusion. This, together with Covid-19 and the AMP project cycle have made for an extremely challenging year. Some £20.0 million of secured orders originally scheduled to be completed this financial year have slipped into 2021, due to the effects of coronavirus. This revenue is now reflected within the 2021 budgets.

Divisional Performance

As stated in the announcement of 15 October 2020, the loss-making contracts primarily related to the Water sector where each project has been analysed and full anticipated losses have been accrued. The major loss-making contract in the Water Division will be completed early next year and we believe there will be no further adverse impact on cash flow.

Within Built Environment, Highways has been loss-making due to two poorly performing contracts which are now complete and the final settlements are being pursued. The Telecoms division has performed well on the back of increased expenditure on fibre by the Telecoms industry. Building has been significantly impacted by Covid-19, with consequent delays, and this has resulted in the division being loss-making this year.

Management has taken action to improve on-site contractual performance and programme delivery to preserve margins going forward. Furthermore, the evaluation of risk across the entire life cycle of contracts and subsequent reviews have been strengthened and are now more robust.

Group Financial Position

As previously announced, the Board appointed Arrowpoint Advisory, part of Rothschild & Co on 25 September 2020 to help secure a medium-term debt package more appropriate to the size and nature of the Group's businesses and risk profile, which also takes into account the change in payment terms on the new Framework Agreements. It is expected that this medium-term debt package will be in place by the end of February 2021. In the meantime, the Group has taken significant steps to improve debt collection and to operate within its current overdraft facilities of £15 million, albeit there has been regrettably some creditor stretch in recent weeks.

Initiatives to release cash from property development projects are well underway with encouraging indications on achievable values. One development is now sold, and the sale process is on-going on the second completed development. The final two projects are scheduled to complete in February and April next year and the initial level of buyer interest is encouraging on the back of a strong demand for housing. No further development projects are currently being undertaken.

Board Changes Update

Actions to strengthen our senior management team are well underway. Further to our announcement on 28 October 2020, Alan Foster, our recently appointed Chief Financial Officer, will join the Group on 4 January 2021 and will be appointed a Director with effect from that date. The process for securing a new Chief Executive Officer is well advanced and is likely to conclude in the first quarter of next year.

Outlook

The Covid-19 pandemic will continue to constrain our operations running into 2021. However, we will enter the new fiscal year with a secured order book of circa £200 million and with visibility on a further £100 million of framework orders at this stage. With expenditure in the AMP 7 cycle starting to ramp-up and the benefits of our efficiency initiatives set to accrue, we look forward to a return to previous levels of profitability. As the level of Group profitability recovers, the Board will look to reinstate the payment of dividends beyond 2021.

Ian Elliott, Acting Chairman, commented:

"2020 has unquestionably been a difficult year for the Group, with the combination of the Covid-19 constraints, the AMP transition and the consequences of prior year contract adjustments. However, I would like to acknowledge the fortitude of everyone within the Group in rising to the challenges we have faced.

We will enter 2021 with many issues already addressed, with an encouraging order book, a strengthened management team and with the optimism of a return to profitability."

Enquiries:

nmcn Plc - 01623 515008

Ian Elliott, Acting Chairman

Robert Moyle, Acting Chief Executive

Mike Holt, Audit Committee Chair

About nmcn

nmcn Plc (TIDM: NMCN) is a leading engineering and construction company in the UK. Its talented 2,000-strong team offers multi-sector engineering and construction skills, technical innovation, design, and specialist fabrication.

The Company delivers major built environment and water industry projects across the UK - from buildings and highways to large-scale water networks and treatment plants. With its history dating back to 1946, nmcn now has 12 UK offices and four off-site manufacturing facilities.

LEI Number: 213800ANYQVA5OS51A68

www.nmcn.com