Nexus Infrastr. Regulatory News (NEXS)

16 May 2024

Nexus Infrastructure plc

("Nexus" or the "Group") Interim results for the six months ended 31 March 2024

Nexus Infrastructure plc (AIM:NEXS), a leading provider of essential infrastructure solutions, announces its unaudited interim results for the six months ended 31 March 2024 (HY24).

Commenting on the period in review, Charles Sweeney, Chief Executive of Nexus, said: "The Group made good progress against its strategy in the first half, securing significant contracts for both new sites and on further elements of existing multi-phase developments. We have maintained our focus on operating discipline and the management of costs, ensuring that the business has the optimum resources in place to benefit from future improvements in the residential housebuilding market. We continue to review opportunities in other key national infrastructure sectors such as water, transport, and energy.

"Whilst customers remain cautious on awarding new contracts, we have entered the second half with good momentum, reflecting the strength of Nexus' offering, and providing the Board with confidence in delivering in H2 and beyond."

Financial summary

Operational summary

Board update

Outlook

For more information, please contact: 

Notes to Editors 

 Nexus is a market-leading provider of essential infrastructure solutions. 

Tamdown provides a range of civil engineering and infrastructure services to the UK housebuilding sectors, with operations focused on the South-East of England and London. It has an established market-leading position, having been in operation for over 45 years. 

  www.nexus-infrastructure.com

Executive Review

The Group made good progress in the first half with early signs of improvement in the sector allowing for cautious optimism. We have continued to focus on delivering high levels of infrastructure services to our clients in the short-term as well as our strategy for long-term growth, positioning us well for the market upturn in the years ahead.

Whilst customers remain cautious on awarding new contracts, we have entered the second half with an orderbook at £72m which has been growing steadily over the last six months, from a FY23 year-end position of £46.0m.

Revenues for the period were £26m, which is in line with the Board's expectations.

The progress made reflects the strength of Nexus' offering and the value Tamdown delivers to its customer base.

There are early signs of market improvements, and while we believe there is some way to go before we see more confidence in the housebuilding sector, we are making steady progress and have secured significant contracts in the period, for both new phases of existing projects and on new developments.  Whilst we are encouraged by the initial improvements in the market and are investing in strategically positioning the Group for the opportunities ahead, we have and will continue to maintain our focus on operating discipline, improving margins, and managing costs.

Nexus has maintained a robust balance sheet with cash and cash equivalents of £9.3m at the HY24 period end (H1 2023: £15.9m), which whilst slightly behind management's initial expectations, new project awards have resulted in an increase in working capital requirements. We expect the momentum in new contract starts to continue through the second half of the year.

Operational update: Nexus Infrastructure

We remain focused on our mission to be recognised as a leading provider of essential infrastructure solutions, by delivering outstanding performance through a focus on delivery, customer service and diversification.

We remain focused on delivering against our strategic objectives to: grow with our customers; expand our market; and focus on financial delivery.

Tamdown has a significant role in the construction of large, complex housing developments on behalf of its customers, which include the UK's premier housing developers. Many of these developments are completed in phases, over several years. As a trusted provider of infrastructure solutions, Tamdown is able to grow alongside its customers as they invest in such multi-phase developments.

Expanding our market through diversification is a key pillar of our strategy. We have identified future growth opportunities outside of our current core sector of residential housebuilding. Sectors of potential interest are those which are critical to the UK's national infrastructure, driven by matters such as trends in demographics, environmental needs, and energy security. These sectors have multi-decade horizons and are less prone to short-term economic pressures.

We have continued to maintain our control of operational discipline, together with the management of costs. New processes have been introduced to enhance productivity. With this focus on financial delivery, the Group is ideally placed to benefit from the upturn in the market.

 Operational update: Tamdown

Tamdown provides a range of essential civil engineering and infrastructure solutions to the housebuilding sector. These services include earthworks, building highways, substructures and basements, and installing sustainable drainage systems. It has an established market-leading position having been in operation for over 45 years. It is particularly recognised for its experience and capabilities in the safe delivery of large, complex, multi-phase developments. It has a strong brand and a loyal customer base.

Tamdown's order book was £72m (H1 2023: £85.3m) at HY24, having grown steadily over the previous six months from £46m at the end of FY23. In the period, Tamdown secured eight new contracts, leveraging its strong relationships and reputation for quality delivery.

With good visibility of new contracts with our longstanding customers on significant multi-phase developments, we are encouraged by Tamdown's performance in H1. The Group continued to maintain strict cost control and operational excellence.

Health & Safety remains our highest priority and we are very pleased that Tamdown received the prestigious Royal Society for the Prevention of Accidents (RoSPA) Order of Distinction (15 Consecutive Golds) Award in recognition of its performance and its commitment to Health & Safety.

Financial Review 

Revenue and profits

Revenue for the Group of £25.8m (H1 2023: £51.0m), which is in line with management expectations and reflects the challenging market conditions Tamdown is currently operating in.

Gross profit for the Group of £3.5m (H1 2023: £5.7m), aligning with revenue for the period.

Administrative expenses for the Group (for continuing operations) reduced by over £0.9m to £4.8m before exceptional items (H1 2023: £5.7m), as a result of the decisive action to manage costs and the subsequent restructuring within Tamdown.

The Group's operating loss, for the period was £(1.3m) (H1 2023: £0.05m operating profit). The net finance charge for the half year totalled £0.2m (H1 2023: £0.0m). 

The Group recorded a tax charge for the period of £0m (H1 2023: £0.4m) representing an effective tax rate of 25% (H1 2023: 21.5%). The income tax expense relates to continuing operations. Robust balance sheet and cash position

The cash and cash equivalents balance at 31 March 2024 was £9.3m (H1 2023: £15.9m) which was lower than management expectations as a result of the larger than anticipated investment in working capital to initiate new projects. Operating cash inflows before working capital movements were £0.0m (H1 2023: £1.8m). Working capital outflows in the period were £4.6m (H1 2023: £5.9m outflow).

Cash outflow from investing activities included £0.1m on the purchase of property, plant, and equipment (H1 2023: £0m).

Treasury risk management

The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved, consistent with retaining liquidity for the Group's operations. The Group deposits funds only with financial institutions which have a minimum short-term credit rating of A. As the Group operates wholly within the UK, there is no requirement for currency risk management.

Market Update

The fundamental market growth drivers for the Group continue to remain positive. Whilst the structural undersupply of new housing provides us with confidence that our housebuilding customers will continue to demand our quality services when conditions normalise, we are starting to see recent signs of improvement, with some stabilisation, albeit at a gradual pace.

Market sentiment remains consistent that there will be a recovery in the housebuilding market over the next 18 months, coupled with a view that the interest rate cycle has peaked highlighted by an increase in mortgage applications. Tamdown's services, capabilities and expertise form the principal element of activities at the start of any new development and will therefore feature early in the cycle when the market upturn takes place.

Board Change

The Board announces that Michael Morris, Non-Executive Director, has tendered his resignation from the Board with effect from 15 August 2024. Mike led the Group through a period of significant growth, since the management buyout with 3i in 1999 through to negotiating the disposals of TriConnex and eSmart Networks last year. Having been a great support in his latest role as Non-Executive Director over the past 16 months, he remains a committed and significant shareholder of the Group, standing down to enable him to focus his full attention on his Executive role outside of the Group.

Summary and Outlook

Nexus entered the second half with cautious optimism and good visibility of new contracts with our longstanding customers on significant multi-phase developments.

As a Group, we are rightsized and well positioned for the market upturn and whilst we are encouraged by the initial improvements in the market, we are cognisant of the continuing near-term market uncertainties and any impact of the upcoming general election. Notwithstanding this, the UK's housing market has been in a long-term position of structural undersupply for many years and the number of new houses being built has failed to keep pace with the rate of household formation. The long-term fundamentals of the housebuilding sector remain strong.

We are committed to maintaining our focus on delivering outstanding service for our customers and optimistic about future opportunities, including those in other sectors.

Charles Sweeney Chief Executive Officer

Dawn Hillman Chief Financial Officer

15 May 2024

Condensed consolidated statement of comprehensive income for the six months to 31 March 2024

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Condensed consolidated statement of financial position at 31 March 2024

Condensed consolidated statement of changes in equity for the six months to 31 March 2024

Condensed consolidated statement of cash flows for the six months to 31 March 2024

Notes to the condensed consolidated financial statements

For the six months to 31 March 2024

1. Basis of preparation and accounting policies

The interim report of the Group for the six months ended 31 March 2024 has been prepared in accordance with UK-adopted IAS 34 "Interim Financial Reporting" and the AIM Rules for Companies.

The inter report does not constitute financial statements as defined in Section 434 of the Companies Act 2006 and is neither audited nor reviewed. It should be read in conjunction with the Report and Accounts for the year ended 30 September 2023, which is available on request from the Group's registered office, Nexus Park, Avenue East, Skyline 120, Great Notley, Braintree, Essex CM77 7AL or can be downloaded from the website www.nexus-infrastructure.com.

The comparative information for the financial year ended 30 September 2023 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters which the auditor drew attention by the way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

The interim report has been prepared on the basis of the accounting policies as set out in the Report and Accounts for the year ended 30 September 2023.

In preparing this interim report, the significant estimates and judgments made by the Directors in applying the Group's accounting policies and financial risk management objectives were the same as those set out in the Report and Accounts for the year ended 30 September 2023.

Going concern

In determining the appropriate basis of preparation of the interim report, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the interim report.

2. Revenue

Revenues from external customers are generated from the supply of services relating to construction contracts. Revenue is recognized over time in the following operating divisions:

Unaudited 31 March 2024

Unaudited 31 March 2023

Audited 30 September 2023

Nexus Infrastructure plc

3. Segment analysis

The Group has one operating division under the control of the Executive Board, which is identified as the Chief Operating Decision Marker as defined under IFRS 8: Operating Segments:

Ø Tamdown

Ø Nexus Park

All of the Group's operations are carried out entirely within the United Kingdom.

The results for TriConnex and eSmart Networks have been presented as discontinued under IFRS 5, with the Tamdown and Group administration expenses comprising the continuing operations below. The related assets and liabilities of these operations have been similarly presented.

Segment information about the Group's operations is presented below:

4. Exceptional items

5. Taxation

Taxation is recognised based on management's estimate of the weighted average effective annual tax rate expected for the full financial year. The estimated effective annual tax rate applied to the pre-tax income for the six months ended 31 March 2024 is 25%.

6. Dividends

A final dividend for the year ended 30 September 2023 of 2.0p per share was approved by shareholders at a general meeting on 16 April 2024 and was paid to shareholders on 7 May 2024. This has not been included as a liability in these financial statements. The total final dividend paid was £180k.

The Board is declaring an interim dividend of 1 pence per share. The interim dividend will be paid on 28 June 2024 to shareholders on the register at close of business on 24 May 2024. The shares will go ex-dividend on 23 May 2024.

7. Earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of shares in issue for the year to assume conversion of all dilutive potential shares.

The calculation of the basic and diluted earnings per share is based on the following data:

Nexus Infrastructure plc

Notes to the condensed consolidated financial statements (continued)

For the six months to 31 March 2024

8. Related Party Transactions

There have been no significant changes in the nature and amount of related party transactions since the last Report and Accounts as at and for the year ended 30 September 2023.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated in full on consolidation. 

Statement of Directors' responsibilities

The Directors confirm, that, to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with UK-adopted IAS 34 "Interim Financial Reporting"; and

· the condensed set of financial statements has been prepared in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.