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NORTH MIDLAND CONSTRUCTION PLC

UNAUDITED CONDENSED GROUP HALF YEARLY FINANCIAL STATEMENTS

27 August 2009

North Midland Construction PLC ('the Company') the UK provider of civil engineering, building, mechanical and electrical services to public and private organisations, announces interim results for the six months ended 30 June 2009.

Highlights from the results and the Chairman's Statement:- 

			Six Months Ended		Six Months Ended
			30 June 2009		30 June 2008
			£'000		£'000
Revenue			71,263		103,533
Profit before Tax			1,367		792
Net Profit after Tax			984		554
Earnings per Share			9.51p		4.8p
Proposed Dividends			2.5p		2.5p

• Group profit before tax up by 72.6% compared with previous year

• Interim dividend maintained at 2.5p

• Cash position improved

• All divisions and subsidiaries currently trading profitably

For further information:-

Robert Moyle, Chairman	-	01623 518812
North Midland Construction PLC

  CHAIRMAN'S STATEMENT

The second quarter has delivered an improved performance. Group revenue for the half year declined to £71.26 million, from £103.53 million for the comparable period last year, but profitability climbed to £1.37 million from £0.79 million, an increase of 72.6%.

A significant enhanced performance was achieved by the parent company, with profitability rising to £0.98 million from £0.14 million. All three divisions were profitable, with the Utilities division providing a creditable performance, after the problems experienced during the previous year. The Civil Engineering division suffered from decreased revenue and profitability, due to cutbacks in expenditure by major clients during the current economic recession, whilst the Highways division produced a result comparable to that of last year.

North Midland Building has been the Group member to be the most severely affected by the economic situation and profitability declined to £0.09 million from £0.17 million the previous year. However, the subsidiary has recently secured £12 million of orders, which will be constructed in the second half of this financial year.

Profitability at Nomenca, the Mechanical & Engineering subsidiary, fell to £0.29 million from £0.48 million, on revenue reduced by 4%, due to reduced expenditure primarily by the water sector. An improved performance is anticipated for the second half of the year.

Progress has been made on the resolution of problematical accounts and, as previously reported, the negotiations with A E & E Lentjes Limited at Fiddler's Ferry and Ferrybridge have been satisfactorily concluded. The anticipated outturn on the Halifax Sewerage Treatment Works contract remains the same as at 31 December 2008. As a result of these resolutions, there has been a cash inflow to the Group of £1.39 million in the half year.

The economic situation continues to remain very difficult and whilst many tenders have been submitted, few contracts are being commenced. Across the Group cutbacks in expenditure on framework contracts are also being experienced, particularly in the water sector. There is a requirement, therefore, to secure further workload. However, the AMP5 framework for Severn Trent Water and South Yorkshire Digital Scheme have recently been won and both of these contracts will provide significant revenue in the forthcoming years. Current revenue for this year is £150 million and already £70 million has been attained for 2010. The overall cost base of the Group has been reduced to align with current revenues. In view of this, a result similar to the previous year is anticipated.

In order to maintain a return to shareholders, the Board recommends an interim dividend of 2.5p (2008 - 2.5p) per share, which will be paid on 2 October 2009 to the shareholders on the register on 11 September 2009.

R Moyle

Chairman

North Midland Construction PLC

  UNAUDITED CONDENSED GROUP INCOME STATEMENT

The unaudited Group results for the half year ended 30 June 2009 are shown below together with the unaudited Group results for the half year ended 30 June 2008 and the audited Group results for the year ended 31 December 2008.

	Six Months Ended 30 June				Year Ended
	2009		2008		31 December 2008
	£'000		£'000		£'000
Revenue	71,263		103,533		202,215
Other operating income	78		115		178
	71,341		103,648		202,393
Raw material and consumables	(13,756)		(19,881)		(35,972)
Other external charges	(34,635)		(56,114)		(116,447)
	22,950		27,653		49,974
Employee costs	(19,192)		(24,081)		(41,923)
Depreciation of property, plant & equipment	(845)		(945)		(1,860)
Other operating charges	(1,440)		(1,679)		(2,856)
Group operating profit	1,473		948		3,335
Finance costs	(106)		(156)		(460)
Profit before tax	1,367		792		2,875
Tax (Note 4)	(383)		(238)		(841)
Profit for the period	984		554		2,034
Attributed to:-
Minority interest	52		84		206
Equity holders of the parent	932		470		1,828
	984		554		2,034
Earnings per share basic and diluted (Note 3)	9.51p		4.80p		18.65p
Dividend per share (Note 5)	6.00p		6.00p		8.50p

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Six Months ended 30 June 2009						Six Months to		Year Ended
							30 June		31 December
							2008		2008
	Total Attributable		Minority		Total		Total		Total
	to Equity Holder		Interest		Equity		Equity		Equity
	of the Parent
	£'000		£'000		£'000		£'000		£'000
Balance at 31 December 2008	18,805		654		19,459		19,069		19,069
Profit for the half year	932		52		984		554		2,034
Dividends	(588)		(100)		(688)		(768)		(1,013)
Purchase of minority interest	-		-		-		(631)		(631)
Balance at 30 June 2009	19,149		606		19,755		18,224		19,459

The total attributable to equity holders of the parent is the aggregate of share capital, capital redemption reserve and retained earnings. Share capital of £980,000 and capital redemption reserve of £20,000 have not changed during the half year ended 30 June 2009.

UNAUDITED CONDENSED GROUP BALANCE SHEET

The unaudited condensed Group Balance Sheets at 30 June 2009 and 30 June 2008 are shown below together with the audited Group Balance Sheet at 31 December 2008.

			30 June				31 Dec
			2009		2008		2008
			£'000		£'000		£'000
Assets
Non-Current Assets
	Goodwill		1,267		1,267		1,267
	Property, plant and equipment		10,307		11,347		11,014
			11,574		12,614		12,281
Current Assets
	Inventories		1,444		1,138		1,481
	Construction contracts		8,621		11,185		9,841
	Trade and other receivables		35,356		44,059		48,656
			45,421		56,382		59,978
Total Assets			56,995		68,996		72,259
Equity & Liabilities
Capital & Reserves attributable to equity holders of the Parent
	Share capital		980		980		980
	Capital redemption reserve		20		20		20
	Retained earnings		18,149		16,692		17,805
			19,149		17,692		18,805
	Minority interest		606		532		654
			19,755		18,224		19,459
Liabilities
Non-current Liabilities
	Obligation under finance leases - due after one year		533		1,216		785
	Provisions		494		396		496
	Deferred tax		65		110		65
			1,092		1,722		1,346
Current Liabilities
	Trade & other payables		32,679		43,320		45,972
	Current tax payable		371		252		900
	Obligations under finance leases - due within one year		928		1,139		1,018
	Bank overdrafts		2,170		4,339		3,564
			36,148		49,050		51,454
Total Liabilities			37,240		50,772		52,800
Total Equity & Liabilities			56,995		68,996		72,259

UNAUDITED CONDENSED GROUP CASH FLOW STATEMENT

		Six Months Ended 30 June				Year Ended
		2009		2008		31 December 2008
		£'000		£'000		£'000
Cash flows from operating activities
Operating profit		1,473		948		3,335
Adjustments for:
Depreciation of property, plant and equipment		845		945		1,860
(Gain) on disposal of property, plant and equipment		(77)		(100)		(144)
(Decrease)/increase in provisions		(2)		(33)		67
Operating cash flows before movements in
working capital		2,239		1,760		5118
Decrease in inventories		37		576		233
Decrease/(Increase) in construction contracts		1,220		(1,335)		9
Decrease/(increase) in receivables		13,300		473		(4,124)
(Decrease)/increase in payables		(13,293)		(3,741)		(1,089)
Cash generated from/(used in) operations		3,503		(2,267)		147
Income Tax paid		(912)		(882)		(881)
Interest paid		(106)		(156)		(460)
Net cash generated from/(used in) operating activities		2,485		(3,305)		(1,194)
Cash flows from investing activities
Purchase of property, plant and equipment		(41)		(442)		(997)
Proceeds on disposal of property, plant and equipment		175		117		202
Purchase of minority		-		(1,792)		(1,792)
Net cash generated from/(used in) investing activities		134		(2,117)		(2,587)
Cash flows from financing activities
Equity dividend paid		(588)		(588)		(833)
Dividend paid to minority interests		(100)		(180)		(180)
Repayments of obligations under finance leases		(537)		(650)		(1,271)
Net cash (used in) financing activities		(1,225)		(1,418)		(2,284)
Net Increase/(decrease) in cash and cash equivalents		1,394		(6,840)		(6,065)
(Bank overdrafts) and cash equivalents at 1 January 2009		(3,564)		2,501		2,501
(Bank overdrafts) and cash equivalents at 30 June 2009		(2,170)		(4,339)		(3,564)

 

1.	Basis of preparation
	The unaudited condensed consolidated half-yearly financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, and have been prepared on the basis of International Reporting Standards (IFRS’s) as adopted by the European Union that are effective for the full year ending 31 December 2009. They do not include all of the information required for full annual financial statements. These condensed consolidated half-yearly financial statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2008. The comparative figures for the year ended 31 December 2008 are not the Group’s statutory accounts for that financial year. Those accounts have been reported upon by the Group’s auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under Section 237(2) or (3) of the Companies Act 1985.
	The accounting policies adopted in the preparation of the condensed consolidated half-yearly financial statements to 30 June 2009 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 31 December 2008. The Group has considered amendments to existing standards and interpretations that are effective for years ending 31 December 2009 and is of the view that they have no impact on the half-yearly accounts.
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

Six Months Ended 30 June 2009
	Civil Engineering			Highways			Utilities		Building		Nomenca		Total
	£’000			£’000			£’000		£’000		£’000		£’000
Revenue
External sales	26,982			6,101			15,305		1,898		20,977		71,263
Result before
corporate      expense	1,545			529			1,372		799		1,673		5,918
Corporate expenses	(1,348)			(342)			(675)		(702)		(1,378)		(4,445)
Operating profit	197			187			697		97		295		1,473
Finance costs													(106)
Profit before tax													1,367
Tax													(383)
Profit for the period													984
Six Months Ended 30 June 2008
	Civil Engineering				Highways		Utilities		Building		Nomenca		Total
	£’000				£’000		£’000		£’000		£’000		£’000
Revenue
External sales	39,913				8,328		17,653		15,796		21,843		103,533
Result before
corporate expense	1,723				580		109		1,090		1,675		5,177
Corporate expenses	(1,217)				(406)		(499)		(916)		(1,191)		(4,229)
Operating    profit/(loss)	506				174		(390)		174		484		948
Finance costs													(156)
Profit before tax													792
Tax													(238)
Profit for the period													554

Segment assets
					30 June
					2009			2008
					£’000			£’000
Civil engineering					21,505			31,620
Highways					4,863			6,598
Utilities					12,198			13,984
					38,566			52,202
Building					6,560			7,202
Nomenca					11,869			9,592
Total segment assets and consolidated total assets					56,995			68,996
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
	30 June				30 June
	2009		2008		2009				2008
	£’000		£’000		£’000				£’000
Civil engineering	451		548		129				695
Highways	102		114		29				145
Utilities	256		243		74				307
Building	21		30		-				12
Nomenca	15		10		4				16
	845		945		236				1,175
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 £20,788,000 (2008 : £31,906,000) were derived from a single external customer. These revenues are attributable to the Civil Engineering and Nomenca segments.

3.	Earnings per share
	The basic and diluted earnings per share are the same and have been calculated on profits of £932,000 (2008 : £470,000) and 9,800,000 shares in issue.
4.	Taxation
	In respect of the six months ended 30 June 2009, corporation tax has been provided at 28% (2008 : 30%) of the profit without deferment.
5.	Dividends
	Amounts recognised as distributions to equity holders in the half year:-
		Six Months to June
		2009		2008
		£’000		£’000
	Final dividend for the year ended 31 December 2008 of 6p (2007 : 6p) per share	588		588
	The Directors propose an interim dividend of 2.5p per share (2008 : 2.5p per share), total £245,000 (2008 : £245,000), which will be paid on 2 October 2009 to the shareholders on register on 11 September 2009.

6.	Goodwill
	An impairment review of the goodwill figure has been carried out in the light of past performance and forecast future performance. Based on this review, the directors consider that no provision for impairment is necessary.
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 half year ended 30 June 2009 incorporate the following relating to the joint operation:-
		Six Months to		Six Months to
		30 June 2009		30 June 2008
	Revenue	9,072		14,594
	Expenses	8,181		13,604
	Assets	3,574		5,591
	Liabilities	3,574		5,591
8.	Contingent liabilities
	Euler Hermes Guarantee plc, Lloyds TSB and HCC International Insurance Co. Ltd have given Performance Bonds to a value of £5,168,032 (2008 : £7,323,798) on the Group’s behalf. These bonds have been made with recourse to the Group.
	The Office of Fair Trading (OFT) has concluded its initial investigation into the construction industry and the Group is on their list of 112 companies under further investigation. Three outstanding allegations remain against the Group. A hearing was attended with the OFT in July 2008. The Group strongly refutes these allegations and the outcome is still pending.
9.	Seasonality
	The Group’s activities are not subject to significant seasonal variations.

 

 

 

 

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