TIDMNMD
RNS Number : 3463O
North Midland Construction PLC
17 May 2018
North Midland Construction PLC
17 May 2018
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 pleased to be able to report further progress in the
first quarter of this year over the comparable period last year.
Group revenue increased by 19.8% to GBP74.55 million and
profitability by 11.0% to GBP0.64 million. The net margin declined
to 0.86%, which the Board continues to consider to be an
unsatisfactory return.
We have now rationalised our reporting procedure to two
segments. The Built Environment which includes Building, Highways
and Telecoms, and Water, which is self-explanatory, and is a
combination of Nomenca and NMCNomenca.
The Built Environment, on the back of a loss-making performance
in the Telecoms division, delivered a loss of GBP87,000 on a
revenue of GBP24.79 million. Construction maintained the excellent
progress made last year and delivered a profit of GBP0.49 million
on a revenue of GBP10.53 million. Successful geographical expansion
has been extended into the North West and contracts of a higher
notational value are being received. The division is currently
engaged on two major student accommodation projects in Sheffield
and has successfully secured a place on the Leicester City Council
framework. Workload for construction this financial year currently
stands at GBP38.0 million and GBP8.3 million has already been
secured for 2019.
Highways has experienced a solid first quarter increasing
margins to 1.97%, whilst delivering an increased profit of
GBP138,000 on a revenue reduced by 22.7% to GBP7.01 million. The
drop in revenue being attributable to delays in commencement on two
large schemes; one for highway improvements at Sowerby for
Lincolnshire County Council, valued at GBP4.5 million and the other
for flood alleviation at Anlaby for the East Riding of Yorkshire,
valued at GBP8.5 million. The number of frameworks currently
secured is twelve, and works continue to emanate from these. Very
recently four lots of a multi-disciplinary framework for Nottingham
and Derby City Councils have been won and work will start to flow
in the near future. These, coupled with an order book for GBP27.0
million already secured for completion this year and GBP9.0 million
for next year, provides confidence that budgetary targets will be
achieved.
The Telecoms division has continued to be loss-making during the
first quarter due to on-going delivery problems and declining
workloads on the Virgin Media term contract, most particularly in
the North West area. A loss of GBP714,000 was generated on revenue
reduced by 13.0% to GBP7.25 million. Network expansion has
generally been curtailed across the country, but positively a price
review has been successfully negotiated with Virgin Media with
effect from 1st April 2018. Successful returns are being achieved
on the term contracts being undertaken for Telent and Centro in the
Midlands and K.Com in the Hull area. However, there is an urgent
need to return this business to profitability and a thorough review
of all operations and performance is currently being
undertaken.
The Water segment has yet again produced an enhanced return with
revenues increasing by 24.2% to GBP49.76 million and profitability
by 57.9% to GBP731,000. Net margin improved from 0.85% to 1.47%.
Both Nomenca and NMCNomenca have grown on the back of increased
expenditure in the middle of the AMP6 cycle by the water companies.
NMCNomenca delivered a profit 21.9% ahead of the previous year on
revenue increased by 27.1% to GBP34.41 million. Nomenca, similarly
increased profitability by 175.5% to GBP303,000 on revenue
increased by 18.0% to GBP15.35 million.
NMCNomenca is involved in four high profile joint ventures in
Newark, Ambergate, Frankley and the Elan Valley Aqueduct and all
are large and engineeringly complex projects. It is a testament to
the confidence that Severn Trent Water have in the team, to work
collaboratively with its partners to deliver projects on this
scale. All the schemes are progressing well with the tunnel drive
at Newark complete and two of the three drives on the Elan Valley
Aqueduct also successfully finished. Both reservoirs at Ambergate
are now constructed and tested, the latter utilising the Laing
O'Rourke explore twin-wall precast system, which further developed
our experience of using off-site build techniques.
Nomenca continues to expand in its chosen markets, utilising its
network of divisional offices, and the growth achieved servicing
Yorkshire Water from its Leeds base, has been particularly
impressive. South West Water went to the market for its AMP7
frameworks earlier in the year and I am delighted to report that
the MEICA Capital Works Framework was retained, maintaining our
significant presence in the area.
The off-site build capabilities in steel fabrication, control
panel and chemical dosing rig manufacture, are also being expanded.
To accommodate this growth, new and larger offices and workshops
have been leased in Leeds, St Austell and Plymouth, providing a
significantly improved working environment for the staff.
The current projections for revenue this year are GBP160 million
for NMCNomenca and GBP65.0 million for Nomenca and these will be
achieved, along with the forecasted profitability.
Three of the current water companies for whom we are currently
engaged have gone to the market this year for their AMP7 programme.
South West Water has already determined and Nomenca were a
significant winner, as I stated previously. Severn Trent and
Yorkshire are still engaged in the procurement process and whilst
failure to be selected in our current areas of service would be a
major blow, significant opportunities to expand the level of
current business being undertaken are also available and need to be
secured. Whatever, the results they will have no impact on this
year's results for the Water segment of the Group.
The Construction market is currently quite buoyant and this
year, on the back of its strong customer relationships and its
ability to deliver larger and more complex projects, the Group will
deliver further growth in both revenue and profit. Therefore, a
very selective and thorough approach to contract selection and risk
management is being taken. All the concentration going forward will
be on managing this growth and maximising the return upon it.
To service this growth and also replace the people retiring and
leaving the business is a major undertaking. All industries and
professions are looking for talented, skilled, hard-working and
motivated individuals and we are no exception. Our number of
employees currently stands at 1,698, but we have a persistent
number of vacancies of around one hundred. Close relationships have
been forged and maintained with particular higher-educational
establishments and also schools, and the recruitment and training
of apprentices is going very well. However, we need to do more and
become more diverse at the same time. It was becoming very apparent
that we needed to develop another area of potential recruitment,
and I told you last year about our fledgling initiative with the
Prison Service at HMP Ranby to rehabilitate ex-offenders and
reskill them for roles within the Group. I am delighted to inform
you that the NM Academy at Ranby Prison is now up and running with
the first cohort of ten offenders completing the course. Six have
been offered positions within the NM Group. The second cohort is
now up and running. We see this collaboration as a massive
opportunity for all three of the parties concerned.
The retention of our existing employees is also of paramount
importance, and to do that we need to offer them the opportunity to
progress their careers within the Group and attain the level of
skill and qualifications that they aspire to, whilst valuing them
as individuals. We want this Group to be a great place to work,
where our people are happy and motivated. To achieve this, high
levels of training in skills, management and leadership have been
maintained. Their well-being is also of massive importance and the
construction industry has an extremely poor record in Mental
Well-Being in particular, with the highest suicide rate in UK
industry. Mental Health Awareness training is currently being
undertaken throughout the Group.
Health and Safety is always on the highest agenda as far as your
Board is concerned. It is extremely gratifying to experience the
improvement in performance and awareness, as the progression in
culture from "Safe to Safer" becomes embedded. The recruitment of a
behavioural psychologist to the Group will only but assist on this
journey. Our Accident Frequency Rate (AFR) has now declined to
0.09, and Nomenca have operated for a three year unbroken period
without a RIDDOR, which is a fantastic achievement that they should
all be extremely proud of.
Running a sustainable business is very close to our hearts, and
good progress is being achieved in the reduction of our carbon
footprint and waste. The Group still needs to go further in
embracing new technology to reduce adverse environmental impact,
and in overall waste reduction. Going forward initiatives will be
introduced with the supply chain to reduce the need for packaging
that leads to the production and subsequent necessary treatment of
this waste. The new company car policy also includes for the
provision of hybrid vehicles.
CSR activity is well promoted throughout the Group, but we are
still looking at the other areas, where we can have a greater
impact on the communities upon whom our operations impact on and
where we recruit from. Material collection and donation is
valuable, but other contributions such as volunteering can be of
greater benefit and provide a greater 'feel good factor' for our
employees and these are currently being introduced.
The Group is currently experiencing strong growth in both
revenue and profitability and cash-flow continues to be robust. To
utilise some of the free-flow cash, "NM Investments" has been
established. The purpose being to generate both a development
profit, at a margin currently in excess of existing contracting
margins, and also provide revenue and a return for the Construction
Division. The first opportunity, in collaboration with a developer,
Earl and Pelham, for twelve town houses in Nottingham has already
commenced on site. The land has recently been purchased for a
second joint-venture with another party, for a development in
Sutton-in-Ashfield. Both of these schemes are a tentative "toe in
the water" on a moderate scale with low risk and should provide
enhanced returns.
You would not expect me to conclude without comment on the
current situation with regard to the ongoing legacy contractual
dispute with Cyden Homes Limited. As previously reported,
permission has been granted to appeal the High Court ruling and
this will be heard later in the year and pursuit of our entitlement
is ongoing.
The Board decided to maintain the level of final dividend
payable based upon the current level of profitability, but a
progressive dividend policy is a key objective going forward. A
secured workload to date of GBP310 million for delivery this
financial year and a promising level of secured orders for the
subsequent year, leads the Board to be confident in the delivery of
an improved performance this financial year.
This year will see the retirement from the Group of several key
long-serving individuals, whose skill and dedication have
contributed to the growth of the Group from being a regional civil
engineering contractor to a national multi-disciplinary entity.
Martin Queally and Mark Blakeway, with 54 and 33 years of service
respectively, rising from labourer and site engineer to director
positions are ample testament to the opportunities to progress a
career within this organisation.
Steve Brown has also informed me of his desire to retire from
the Board later in the year. Steve has served on the Board since
2004. He has also undertaken the roles of Senior Non-Executive
Director and Chairman of both the Audit and Remuneration
Committees. His knowledge, experience and most particularly wisdom
have proved invaluable and of immeasurable benefit to the Group.
Both the Board and the shareholders are indebted to him for his
total commitment and formally extend our thanks to him for his
service to the company.
On a personal and particularly sad level, my mother died
peacefully on 27th April at home. She was devoted to my father and
this company and supported him right up to the hilt, through good
and bad times, particularly in the early formative years, even
being directly involved as a director of the now no longer trading
Nottingham Plant Hire.
To finish, may I take this opportunity to thank all the
shareholders for their continued support and all the employees all
their continued endeavour, 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 losses in the telecommunications
sub segment are disappointing and full management attention is
being focussed to rectify the situation.
The forward order book and cash generation are positive
indications of a successful year. It is expected that these will
continue."
Enquiries
North Midland Construction PLC 01623 515 008
John Homer, Chief Executive
Dan Taylor, Finance Director
This disclosure is made in accordance with Article 19 of the EU
Market Abuse Regulation 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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