North Midland Construction PLC (NMC), the Nottinghamshire-based UK provider of civil engineering, building, mechanical and electrical services, has just announced its latest half year results for the six months ending 30 June 2014.
They reveal that group revenue is up 1.5% to £90.98m from the £89.39m that was reported for the first half of 2013.
Profits before tax for the first half of 2014 are £0.37 million compared to a loss before tax of £0.48 million for the same period last year. In addition, the underlying profit before tax of the business, prior to problematic contract provisions was £1.78 million, compared to £1.24 million for the first half of 2013.
Problems still remain in the Building & Civil Engineering (BCE) division, particularly in connection with the resolution of three legacy contracts. This has resulted in an operating loss of £0.84 million for the period, however, this compares to a £1.58 million loss for the same period last year. The division’s revenue has reduced by 31.3% to £11.72 million too.
Progress is being made to resolve the problematic contracts and the division has been completely restructured under new management. The underlying business is now trading profitably and the division continues to perform well for long-standing clients including Tata Steel, WPD and East Midlands Housing Association. A £3 million contract to build an office block in Grove Park, Leicester, was recently awarded to the division, with work due to begin on the project this September.
The NMCNomenca division has had a very encouraging first half-year, with operating profitability increasing by 8.4% to £0.94 million from £0.87 million for the same period last year, on revenue increased by 10.8% to £41.31 million.
The AMP5 programme is drawing to a conclusion with the inevitable pressure on margins, but costs have been controlled and the division is performing to expectations. In addition, Severn Trent Water has recently awarded the division the Asset Maintenance Framework which covers their Eastern Area, at a value of £6 million per annum. The framework has a five year duration, with the option of a two year extension.
Meanwhile, the division has secured a lucrative £16.5 million order to reconstruct Ambergate Reservoir, in conjunction with Laing O’Rourke.
Preparatory work has already started on the Severn Trent Water AMP6 programme, which was secured in December 2013. The E5 programme for Severn Trent Water, for which NMCNomenca has a 25% share of the construction consortium, will be virtually complete by the end of the year and the projected outturn remains encouraging.
Nomenca, the group’s mechanical and electrical subsidiary, has had a relatively slow start to the year, with revenue declining by 3.7% to £19.04 million from £19.76 million for the same period last year. However, operating profitability was maintained at £0.18 million.
The reduction in revenues was caused by the delayed award of a major project and reduced expenditure on one particular framework. Revenue is expected to increase in the second half of the year and a further £24 million worth of orders has already been secured for completion this year.
This means that the performance of the division will be weighted towards the second half of the year and NMC is confident it will achieve its full year target.
The Highways division has suffered a slower start to the year than originally forecast, with delays in anticipated expenditure and the award of a major project. In spite of this, revenue escalated to £7.71 million but this was insufficient to cover the overheads, which had been increased in anticipation of the projected increased revenue. Therefore, an operating divisional loss of £0.01 million was incurred.
Secured revenue for the division for this year currently stands at £24.60 million, so the second half-year will show a significant increase and a return to profitability.
The Utilities division has benefited from increased expenditure by telecoms companies on broadband infrastructure, causing revenue to rise by 15.5% to £10.99 million with improved operating profitability which has increased to £0.14 million.
The division is well represented with frameworks for the major telecom companies and all the indications are that expenditure on these frameworks will remain robust.
Meanwhile, there was a net outflow of cash of £8.59 million and cash collection in certain areas remains both difficult and protracted. The current facility remains adequate to maintain the working capital requirements.
The problematic legacy building contract remains cash negative and the resolution of final accounts of legacy contracts within the B & CE division remains protracted which, coupled with an increase in working capital as revenue increases, has contributed to this outflow.
NMC Chairman Robert Moyle said: “The results demonstrate the further progress that has been made since our Interim Management Statement released on 19 May 2014. The return to profitability is encouraging and orders received to date to be executed this financial year stand at £178 million.
“Maximum effort is being expended to bring the legacy contracts to conclusion and settlement and whilst the Group continues to trade profitably, there is still potential risk in the resolution of legacy contracts.”
