TIDMNMD
RNS Number : 4778F
North Midland Construction PLC
18 May 2017
North Midland Construction PLC
18 May 2017
North Midland Construction PLC (the "Group")
AGM Statement
At the Annual General Meeting to be held today at noon, the
Group's Chairman, Robert Moyle, on behalf of the Board will make a
statement to shareholders, including the following on current
trading:
"We are delighted to be able to report that the momentum of
increased profitability and revenue growth generated in the last
financial year has been maintained in the first quarter with the
delivery of a Group profit of GBP580,000 compared with GBP237,000
for the same period last year, an increase of 144.7%. Revenue
increased by 4.7% to GBP62.24 million. The net margin, whilst
showing a significant improvement, is 0.93%, which the board
continues to consider an unsatisfactory return.
The construction market, riding on the back of sustained
economic growth, has continued to expand with greater opportunities
being available and the water companies AMP6 cycle is now fully
underway. As a consequence of this the current Group order book for
work to be executed in this financial year is circa GBP254 million.
Further orders will emanate from the existing frameworks and other
tendered opportunities and therefore the forecasted revenue for the
year will be achieved, if not exceeded.
As you will have noticed from the 2016 Annual Report and
Accounts, the reporting procedure has changed from Divisional to
Market Sector (i.e.) Construction, Power, Highways,
Telecommunications and Water. A detailed segmental analysis of
these sectors will provide a deeper understanding of the current
Group performance and future prospects for growth.
Construction has experienced a slow start to the year, due to
delays in secured projects getting underway. Consequently both
profitability and revenue in the first quarter (Q1) declined over
the comparable period last year. Revenue by 13.7% to GBP4.76
million (Q1 2016 5.51 million) and profitability by 75.2% to
GBP34,000 (Q1 2016 GBP137,000). Secured workload for the year is
currently GBP28 million and for 2018 is currently GBP12 million.
The area of operation still remains predominantly the Midlands and
South Yorkshire region and student accommodation is providing a
resilient market with current projects being undertaken in
Birmingham, Sheffield and Lincoln. However, the portfolio and range
of clients is increasing. Business Development efforts are being
concentrated on becoming a significant presence in the regional
market. To accommodate this growth, and the increasing scale and
complexity of projects being undertaken, more skilled staff are
being recruited and the current staff provided with further
development. Confidence is high that this year's targets will be
achieved.
The power sector continues to offer promise for growth
particularly as we are able to offer a full turn-key delivery
model. Revenue for the first quarter was static in comparison to
the previous years at GBP3.39 million (Q1 2016 GBP3.39 million) but
profitability increased by 80% to GBP18,000 (Q1 2016 GBP10,000).
The secured workload for this financial year currently is circa
GBP12 million and there is a need to secure further orders in the
immediate future. Confidence is high that these will be forthcoming
in the next few months.
The green energy market is a huge opportunity for development,
particularly as the water companies move into this non-regulated
market and work has recently commenced on the Stoke Bardolph Crop
Digester.
Highways continues to provide good opportunities for profitable
growth and geographical consolidation and expansion. Profitability
for Q1 2017 increased by 18.5% to GBP64,000 (Q1 2016 GBP54,000) on
revenue reduced by 9.1% to GBP9.06 million (Q1 2016 GBP9.97
million). Secured workload for this year currently stands at
GBP29.0 million, and tender opportunities are buoyant. Further
orders emanating from secured frameworks for Highways England Area
7 and Lincolnshire County Council will be forthcoming. The division
is currently highly engaged on GBP10 million of associated highway
and infrastructure works on the new York Potash mine in North
Yorkshire for Sirius Minerals. Two major highway and public realm
schemes are successfully nearing completion in the Bristol area,
and a major road improvement scheme, directly for Ikea, a new
customer, for a new store in Sheffield is also progressing
well.
The Telecommunications business, as is well documented, has
experienced problems and it is heartening to report a return to
profitability in Q1 of GBP19,000 (Q1 2016 GBP496,000 loss). Revenue
declined by 6.9% to GBP8.33 million (Q1 2016 GBP8.94 million). The
division has been totally restructured to satisfy the dual
requirements of a return to profitability and increasing customer
demand. The overall market is experiencing a major increase in
activity and the skilled resources to satisfy this requirement are
in short supply. A significant in-house capability exists, along
with supply chain partners, and this enables top levels of customer
service on a 365 / 24 basis to be achieved. The division is heavily
committed to Virgin Media not only on their MOTIF framework
contract, but also on particular discreet schemes under their
Lightening project throughout the Midlands and North. Similar
contracts are being undertaken for Centro in the West Midlands, BT,
KCOM and CT.
Current market demand provides significant opportunities for
rapid growth, but the skilled resources to facilitate the execution
both in-house and in the supply chain, are in very short supply so
a cautious approach is being adopted. Expansion has to be
profitable and the existing high levels of customer delivery have
to be maintained, along with positive cash flow.
The Group is highly engaged in the water sector for many
companies throughout England and Wales, both through its NMC
Nomenca division for Severn Trent Water and the Nomenca subsidiary.
The prime focus continues to be working collaboratively from
conception and construction to completion, to deliver the
respective companies business goals. On high value projects of a
complex nature, joint ventures have been formed to deliver the same
high level of customer service. In addition, to improve and expand
the Engineering and Asset Optimisation Service capability and
external offering Nomenca have appointed Gavin Stonard, formerly a
director of Sweco UK, to the position of Engineering Director.
Revenue escalated by 16% for Q1 to GBP36.69 million (Q1 2016
GBP31.62 million) but profitability declined by 16.4% to GBP445,000
(Q1 2016 GBP532,000), due to a cautious perspective being taken on
the out-turn of several projects that had just commenced during the
period combined with initial start-up costs. Secured workload for
delivery this year currently stands at GBP147.0 million, but only
includes orders actually received under the frameworks to date.
Significant further orders from the water sector are expected to be
received in the near future, giving great confidence for the
business going forward.
NMC Nomenca and Nomenca are currently engaged in four joint
ventures. NMC Nomenca with Barhale at the Elan Valley Aqueduct in
mid Wales and Newark, and Laing O'Rourke at Ambergate valued at
GBP56.0 million, GBP54.0 million and GBP34.0 million, respectively.
The first reservoir at Ambergate has been completed and is
operational and the second, using a precast twin wall method of
construction is on programme and within budget for completion in
January 2018. The first tunnel section and connection on the EVA
has successfully been completed and the second drive is due to
commence ahead of programme next week. On the Newark Strategy
project pipe laying is underway in the Town Centre and the shafts
for the main tunnelling drives are currently being constructed. The
Nomenca joint venture with BAM Nuthall for South East Water has
experienced a slow start to the year, but activity has now started
to increase as orders are forthcoming.
The sectors that the Group is currently engaged in and the
strength of its customer relationships offer great opportunities
for profitable growth and this financial year will deliver a
significant increase in revenue. Concentration now is upon the
sustainable management of this growth and on maximisation of the
return on this increased revenue.
To deliver growth in this industry, in particular, requires
properly trained, motivated, talented people and the current skill
shortages in the construction industry are well documented. The
Group also needs to rebalance both its gender and ethnic diversity.
Currently the national average for the employment of women in
construction is 11%, the Group figure is currently 10%, but both of
these two figures are far too low. The solution to these problems
lies in our hands. The maintenance and promotion of our core values
and the strong sense of a family company are a key element, but it
is also about trust and that for this Group is key. We trust our
people and our customers trust us to deliver.
Relationships with key educational establishments are being
maintained and expanded and current employees incentivised to
attract new personnel into the Group. Also, a new exciting
initiative is underway with the Prison Service locally to
rehabilitate ex-offenders and reskill them for roles within this
Group. The response so far has been very encouraging and is a
further example of the collaborative ethos engrained in this Group
to achieve mutual benefit for all parties involved.
The development and retention of our existing employees is also
of paramount importance to deliver the succession required to
maintain growth. The retention of the Investors in People Gold
status accreditation was an achievement to be particularly proud of
and we aspire to achieve the pinnacle of Platinum within the next
five years. The leadership and management level 3, 5 and 7 courses
have been maintained and the innovative projects undertaken by the
individuals have been fed back into the business and resulted in a
tangible business improvement. The individuals engaged on level 7
have been collectively engaged on the twin projects of improved
communication and brand analysis. An exhaustive consultation
document has been produced and the recommendations contained
therein are currently under consideration. In parallel, technical
training has continued apace and so far this year 1,277 No. days
have been undertaken, an increase of 6.8% over the previous
year.
The health and well-being of our people is always foremost in
our minds and approach to business. Sadly, our safety performance
suffered a reverse last year and performance deteriorated. It is
therefore, extremely heartening to report that after a major
analysis and concentration upon performance, a significant
improvement has been achieved this year with our Accident Frequency
Rate (AFR) declining to 0.04. "Safe by Action" days were
inaugurated last year, where directors visit sites to observe and
discuss our safety culture. A successful sequel has already
happened in March this year and again the benefits and feedback
were extremely positive. The Group and the divisions have been
awarded Gold awards by RoSPA this year and Nomenca received the
President's Award. Naturally, we are very pleased to receive this
commendation from such a prestigious body.
Sustainability is of great importance and is not only linked to
exceptional customer service, but also the impact of our activities
on the environment and the communities, where we work and source
our people from. Great efforts are being made to reduce waste and
our carbon footprint, most particularly in better planning and
monitoring of vehicle usage. Our commitment to the Modern Slavery
Act is total and great strides are being made with our supply chain
to ensure ethical behaviour at all times. CSR activity is well
promoted throughout the Group and also has a secondary benefit in
delivering in a "feel good factor" for the individuals concerned
and also assists in their personal development.
As previously mentioned the Group is currently experiencing
strong growth and further opportunities are plentiful. Controlling
this growth is critical, but also funding it. The maintenance of
cash-flow has improved and the Group continues to operate within
its facilities. The Board is currently engaged on investigating
opportunities for the more profitable utilisation of any free-flow
cash.
The increased level of profitability has enabled your Board to
increase the dividend payable, with your approval. The maintenance
of a progressive dividend policy is a key target. Whilst the Water
and Construction sectors of the Group have commenced the year
slowly, both have strong order books in place and they are on
course to achieve their budgets. This leads the Board to be
confident of delivering an improved financial performance this
financial year.
To finish, may I take this opportunity to thank all the
shareholders for their continued support and all the employees for
their continued hard work, commitment and loyalty."
John Homer Chief Executive commented;
"It is pleasing to report that we have had a strong start to
this year. Our strategy of focusing on getting the basic principles
of risk management right and delivering exceptional customer
service is serving us well. The markets in which we operate are
forecast to grow steadily. We have a robust order book and healthy
sales pipeline. It is expected that this momentum is set to
continue."
Enquiries
North Midland Construction PLC 01623 515 008
John Homer, Chief Executive
Dan Taylor, Finance Director
This information is provided by RNS
The company news service from the London Stock Exchange
END
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