NMCN.L Regulatory News (NMCN)

4 Apr 2008 07:00

North Midland Construction PLC04 April 2008 NORTH MIDLAND CONSTRUCTION PLC 2007 PRELIMINARY RESULTS North Midland Construction PLC ("the Company") the UK provider of civilengineering, building, mechanical and electrical services to public and privateorganisations, announces preliminary results for the year ended 31 December2007. Highlights from the results and the Chairman's Statement:- Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000 Revenue 211,294 175,543 Profit before Tax 3,120 5,497 Profit for the Year 2,192 3,781 Earnings per Share 16.54p 33.38p Dividends 8.5p 8.5p - Another record year in terms of Revenue - North Midland Building and Nomenca have achieved excellent results - Disappointing result for Civil Engineering and Utilities divisions - £90 million workload being carried forward into the New Year - Proposed final dividend of 6.0p (2006 : 6.0p) For further information:- Robert Moyle, ChairmanNorth Midland Construction PLC - 01623 518812 Chairman's Statement The results produced this year are a major disappointment, with a record revenueof £211.3m, a very encouraging achievement, an increase of 20.4% over theprevious year, being negated by a decline in profit before tax to £3.1m, adecrease of 43.3%. The Group picture illustrates a Curate's Egg with exceptional figures beingdelivered by both subsidiaries, North Midland Building and Nomenca, but problemsbeing experienced in the parent company within the Civil Engineering andUtilities divisions. At the Annual General Meeting last year it was reported that the CivilEngineering division, the largest single entity within the Group, had a recordworkload with several major contracts being secured in both the water and powersectors. Major contractual problems have been experienced on the schemes atFiddlers Ferry Power Station and Halifax Sewage Treatment Works, the latterscheme being in association with Black & Veatch Ltd. Both projects haveexperienced major delays for a variety of reasons and the contractual situationhas become very complex, with a large divergence currently being recordedbetween monies claimed and those certified. An anticipation of the eventualout-turn is reflected in the accounts. On a positive note, both contracts havebeen delivered and coupled with other major schemes at Minworth and Ferrybridge,demonstrate the division's ability to deliver projects of major notationalvalue. The contract at Minworth, valued at circa £120m over a four yearconstruction period, in a joint venture with Biwater Treatment Limited forSevern Trent Water has been particularly successful both in terms of budgets andprogramme. Annual revenue for the division increased to £88.2m and thisdemonstrates the ambition to achieve an organic growth target of 10% per annum.Extracting the two problematical contracts, the margin on revenue would havebeen in line with management expectations. The Highways division has produced yet another satisfactory year, withprofitability at a similar level to the previous year, albeit on a reducedrevenue, due to a paucity of tendering opportunities in the critical summerperiod. The highways market continues to be difficult, but the division issuccessfully being considered for schemes of a higher notational value thanpreviously and further new clients were secured during the year. Revenue of£13m was generated for the year. The Utilities division experienced a very difficult and disappointing year, dueto a cutback in the BT contracts for Telent and major losses being incurred on alump sum contract in Kent, which was recorded in the interim statement. Onframework contracts, such as those with Telent, there is a very high fixed costand overhead required to deliver operationally. The contracts are at the end oftheir duration and prices are consequently under pressure. Any decreases involumes, such as those experienced during the year, consequently leads to losseson a large scale. Management did not react quickly enough to the downturn, andboth operational and management changes have been implemented. The divisionalrevenue was £32.1m for the year and operating losses were £2.0m. North Midland Building had another exceptional year with revenue climbing to£37.4m and with margins slightly declining, a profit of £3.2m was returned forthe year. Further successful student accommodation projects were completed anda diverse portfolio of schemes was undertaken during the year including offices,prisons, refurbishments and defence work. The subsidiary has ably demonstratedits technical and commercial capability to deliver large projects across thecountry and this bodes well for the future in a market that will become moredifficult, due to the current economic problems being experienced. Nomenca, the mechanical and electrical subsidiary, produced a record result withrevenue climbing to £45.3m and profitability increasing to £1.3m. Expansion hascontinued both inside and outside the water industry, with a significantbreakthrough being made in Scotland in the production of chemical dosing rigsand the South West with a minor works framework for South West Water. Therelationship with the Civil Engineering division in providing full turnkeysolutions within the water and allied industries is still a key element in thestrategy for growth, but increasingly opportunities are being secured in othersectors such as building services, rail, defence and the waste sector. Thecompany can now be classified as a truly national contractor. The Group takes its corporate and social responsibilities very seriously and forthe first time a separate report has been included in the accounts to providedetails of the progress being made. Health & safety, quality and environmentalperformances, coupled with impeccable customer service are the key mantras ofthe mission statement, along with the maintenance and development of the keyresource, our staff. It is very gratifying to report that the Group's healthand safety performance still continues to be better than the published industrystatistics. To facilitate the continued expansion of the Group, extra office accommodationhas been constructed at the Head Office site at a cost of £1.7m to the highestenvironmental standards. This will provide an improved and more efficientworking environment for the staff, improved environmental performance and spaceto accommodate an increased design capability, as this is an area of targetedexpansion for the future, because clients are increasingly outsourcing thiselement of their contracts. The significant decline in the share price is of great concern to your Board,but to a major extent simply reflects the downward spiral of prices for thewhole construction sector. The current economic situation is of concern.However, the Group operates within some growth sectors such as waste and otherareas such as water with a maintained spend profile. The secured workload for2008 is £90m and this gives your Board confidence that the budgets for 2008 willbe attained. In spite of the diminished result, your Board is keen to maintainthe yield and, therefore, recommend a maintained final dividend of 6.0p, makinga total of 8.5p for the year. R MoyleChairman3 April 2008 Consolidated Income Statement for the Year Ended 31 December 2007 Year ended Year ended 31 December 2007 31 December 2006 £'000 £'000 Revenue 211,294 175,543 Operating Profit 3,301 5,591 Finance Costs (181) (94) Profit before Tax 3,120 5,497 Tax (928) (1,716) Profit for the Year 2,192 3,781 Attributed to: Minority Interest 571 510 Equity Holders of the Parent 1,621 3,271 Earnings per share 16.54p 33.38p Amount of actual final dividend on 6.00p 6.00pordinary shares proposed to theShareholders on the register atthe close of business on 2 May2008, which will be paid on 30 May2008. The calculation of earnings per share is based on 9,800,000 shares (2006 :9,800,000) being the number of shares in issue throughout the period and on aprofit of £1,621,000 (2006 : £3,271,000). Consolidated Statement of Changes in Equity for the Year Ended 31 December 2007 Total Attributable to Minority Interest Total Equity Holders of the Equity Parent £'000 £'000 £'000 Balance at 31 December 17,022 913 17,9352006 Profit for the year 1,621 571 2,192 Dividends Paid (833) (225) (1,058) Balance at 31 December 17,810 1,259 19,0692007 Consolidated Balance Sheet as at 31 December 2007 2007 2006 £'000 £'000ASSETS Non-current AssetsProperty, Plant and Equipment 11,135 8,534Goodwill 106 106 11,241 8,640Current AssetsInventories 1,714 1,046Construction Contracts 9,850 7,009Trade and Other Receivables 44,532 32,845Cash and Cash Equivalents 2,501 8,652 58,597 49,552 TOTAL ASSETS 69,838 58,192 EQUITY AND LIABILITIES Equity Attributable to Equity Holders ofthe ParentShare Capital 980 980Capital Redemption Reserve 20 20Retained Earnings 16,810 16,022 17,810 17,022 Minority Interest 1,259 913 Total Equity 19,069 17,935 Non-current LiabilitiesObligations Under Finance Leases - Due after One Year 1,041 735Provisions 539 531 1,580 1,266 Current LiabilitiesTrade and Other Payables 47,061 36,999Current Tax Payable 895 970Obligations Under Finance Lease - Due within One Year 1,233 1,022 49,189 38,991 Total Liabilities 50,769 40,257 TOTAL EQUITY AND LIABILITIES 69,838 58,192 Consolidated Cash Flow for the Year Ended 31 December 2007 2007 2006 £'000 £'000Cash Flows from Operating Activities Operating Profit 3,301 5,591 Adjustments for:Depreciation of Property, Plant & Equipment 1,695 1,430(Gain) on Disposal of Property, Plant & Equipment (108) (117)(Decrease)/Increase in Reinstatement Reserve (32) 77 Operating Cash Flows before Movement in WorkingCapital(Increase) in Inventories 4,856 6,981(Increase) in Construction Contracts (668) (176)(Increase)/Decrease in Receivables (2,841) (548)Increase in Payables (11,687) 461 10,062 1,654 Cash (used in)/Generated from Operations (278) 8,372Tax Paid (963) (1,484)Interest Paid (181) (94) Net Cash (used in)/from Operating Activities (1,422) 6,794 Cash Flows from Investing Activities Purchase of Property, Plant & Equipment (2,509) (3,173)Proceeds on disposal of Property, Plant & Equipment 120 133 Net Cash (used in) Investing Activities (2,389) (3,040) Cash Flows from Financing Activities Equity Dividends Paid (833) (735)Dividends Paid to Minority Interests (225) (200)Repayment of Obligations Under Finance Leases (1,282) (1,037) Net cash (used in) Financing Activities (2,340) (1,972) Net (Decrease)/Increase in Cash and Cash Equivalents (6,151) 1,782Cash and Cash Equivalents at 1 January 2007 8,652 6,870 Cash and Cash Equivalents at 31 December 2007 2,501 8,652 The accounting policies used in arriving at the preliminary figures areconsistent with those which will be published in the full financial statementsand which were set out in the Group's Annual Report and Accounts for 2006. The accounts have been prepared in accordance with International FinancialReporting Standards (IFRSs) and are presented in sterling. The abridged financial information presented is based on the full accounts ofthe Group for the year ended 31 December 2007, on which the auditors have givenan unqualified report. The accounts have yet to be filed with the Registrar of Companies. The Annual report and Accounts for the year ended 31 December 2007 will bedespatched to the Shareholders on 30 April 2008 and will be available on thecompany's website: www.northmid.co.uk. The Annual General Meeting will be held on 29 May 2008 at 12 noon at the Group'sHead Office at Nunn Close, The County Estate, Huthwaite, Sutton-in-Ashfield,Nottinghamshire NG17 2HW. This information is provided by RNS The company news service from the London Stock Exchange