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RNS Number : 9067S
North Midland Construction PLC
28 May 2009
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North Midland Construction plc
28 May 2009
AGM Statement
At the AGM held at 12.00 noon today, Robert Moyle, Chairman, provided the
following update on trading:
Unsurprisingly, the economic situation is having a major impact on the
construction sector and the industry workload is at an all-time low. However, it
is pleasing to be able to report that the Group has delivered a profit of
GBP420,000 before tax in the first quarter, on a revenue of GBP35.7 million.
These figures compare with GBP969,000 and GBP50.5 million for the comparable
quarter last year. The year started slowly with very low volumes, but the profit
declared in 2008 included an exceptional item of GBP300,000, so a more
appropriate comparison would be a decline of 37.2% and 29.3% in profit and
revenue respectively.
As has been the previous custom, a detailed breakdown of the performance and
prospects of the individual divisions and subsidiaries will provide a greater
insight into the overall Group picture. As you are aware, the parent company is
sub-divided into three operating divisions, which are civil engineering,
highways and utilities.
The civil engineering division has experienced an unprecedented downturn in
revenue in the first quarter due to deferred expenditure by the water companies,
a major sector for the division, and the postponement of several other non-water
selected projects. A loss of GBP191,000 was incurred on a revenue of GBP13.4
million, compared with the 2008 figures of GBP291,000 profit and GBP20 million
revenue. Workload currently stands at 52% of budget, but orders are only booked
once secured. An estimated GBP10 million of water related orders are currently
being negotiated under the framework agreements and should be delivered during
the current financial year. The joint venture with Biwater to deliver the
Minworth project, at a value of circa GBP100million, for Severn Trent Water,
continues to perform very successfully and the "turn of the flow" was achieved
recently. As the project draws to a conclusion, greater visibility of the
eventual outturn is possible and there is cautious optimism that a satisfactory
boost to profitability may be forthcoming before the financial year end. The
highlight of the year so far was the combined resources of the division and the
Nomenca subsidiary, incorporated into a single entity to deliver the Severn
Trent Water AMP4 programme, being successful in their bid for the AMP5
programme, as previously reported, and this will provide a large foundation for
future growth, as the framework is of a potential ten year duration. The water
industry is vital to the success of the division, but it is still active across
a broad range of disciplines, including rail, power and waste. It is these areas
that have been the most affected by the credit crunch and the market is
currently extremely competitive. The results for the previous two years have
been affected by two problematic contracts and their lack of resolution, which
has proved extremely cash negative. Progress to resolution is being made, albeit
slowly, and some payments have been forthcoming. Developments to date, however,
have not caused a revision of the perspective adopted in the 2008 accounts.
Although the division has reported a loss-making first quarter, the year's
forecast is positive.
The highways division has delivered a first quarter profit of GBP52,000 on a
revenue of GBP2.9 million, a decline of 64.4% and 42.0% respectively for the
comparable period of 2008. Current secured workload stands at GBP10.3 million,
which is 55.7% of the year's budget. Public sector tender opportunities remain
at reasonable levels and confidence is high that further orders will be
forthcoming in the near future. Successful geographical expansion into the West
Midlands and the North West has been pursued and several high profile contracts
have been completed, most notably bridges on the M1 widening project and high
quality paving schemes in Leeds City Centre.
The utilities division has been particularly successful in securing framework
contracts for a wide range of telecommunications providers and operators, and
this has provided an element of insulation against the downturn. For the first
quarter the division produced a profit of GBP357,000 on a revenue of GBP8.4
million, compared with 2008 figures of GBP161,000 and GBP10.4 million
respectively. Volumes were particularly low during the period, but there are
some signs now of a recovery to more traditional levels. The Fibrespeed project
in North Wales has almost been successfully completed, with two business parks
still remaining to be connected, due to planning difficulties. This scheme has
provided a high level of revenue during its construction and, fortunately, will
be replaced by the recently obtained South Yorkshire Digital contract valued at
GBP31.0 million, with a contract duration of 30 months. This project is due to
commence in June of this year.
The now wholly owned subsidiary North Midland Building Limited, continues to be
the Group member most deeply damaged by the continuing "credit crunch". The lack
of available finance and declining asset values has impacted dramatically upon
the building sector, with the residential element virtually coming to a
standstill. The company has experienced this first hand on the Skipton project
that it is currently engaged upon. Phase I, which was residential, has
successfully been completed and Phase 2, combining retail and commercial space,
had commenced when the developer's bank withdrew funding. It is hoped that the
situation is only temporary and that construction may recommence in July. Profit
for the first quarter was GBP50,000 on a revenue of GBP1.1 million, compared
with GBP67,000 on GBP7.6 million for 2008. Projects in hand have a total value
of GBP25 million, although not all of that workload will be constructed during
the current year. They include two fire stations, works within the City Hospital
in Nottingham and the construction of one of the largest private houses to be
commissioned in this country in the last few years. The demise of private sector
funding has led the company to concentrate on the public sector and regulated
companies within the private sector.
Nomenca has delivered a first quarter profit of GBP152,000 on a revenue of
GBP9.9 million. The comparative figures for the previous year being GBP304,000
and GBP11.5 million respectively. The company has a significant presence within
the water industry and similarly to the civil engineering division suffered in
the first quarter due to deferred expenditure by the water companies. The
current order book stands at GBP21.7 million and the subsidiary is well
represented with frameworks not just within the water industry, but
organizations such as the Environment Agency, Anchor Housing and British
Waterways. Further orders will be forthcoming from both the water companies and
these other sources during the year. The divisional office structure enables
Nomenca to have a truly national presence and the company recently acquired the
design operation of Imerys, based in Cornwall. This will particularly strengthen
the company's capability in material handling. The manufacture and installation
of chemical dosing rigs is also undertaken and this is the main driver of
business in Scotland. Nomenca, during the year, has also concluded an
arrangement to install the ultra violet equipment of Trojan, a Canadian company,
within the UK.
The Group target is to grow the business organically at the rate of 10% per
annum. In the present economic climate, that is not going to happen and,
therefore, a thorough review of the structure of the business has been
undertaken to implement cost-cutting measures. It is always very sad to
implement a redundancy programme, but one has been instigated to reduce
overheads by 12.5%. A similar programme of headcount reduction has been
undertaken with the site staff and operatives.
The requirement to win business and expand the client base is of paramount
importance. Increasingly, clients are becoming more exacting in their
pre-qualification questionnaires and analysis of systems and procedures. It is
very pleasing, therefore, to be able to report further progress in Corporate
Social Responsibility. Health and Safety is of paramount importance and the
number of accidents, whilst at the same level of the previous year, showed a
significant decline in severity and more importantly the number of Riddors in
the first quarter declined from two to one over the comparable period in 2008.
Both the Group and Nomenca, individually, have been the recipients of ROSPA Gold
Awards for Health & Safety performance and the Minworth site secured a Sector
Commendation. The Health Surveillance programme introduced last year is also
paying dividends by identifying potential problem areas, such as vibration white
finger, thus enabling appropriate risk management.
The measurement and reduction in the Group's carbon footprint is top of the list
of environmental key performance indicators for this year. Great strides have
been made in the reduction of waste, the use of recycled materials and reduced
fuel consumption. Zero environmental incidents in the first quarter, is an
excellent achievement. The workforce has really embraced the cultural change of
personal responsibility that has been engendered and the overall improved
performance is demonstrative of this. This message is also being mirrored within
the supply chain and zero sub-contractor Riddors for the first quarter is a
major step forward.
The Group has always adopted a long term perspective and the key to sustained
growth is the quality of the workforce. In this area, the Group is well blessed
and the decision, to build for the future, was made to maintain the apprentice
scheme and the university sponsorship scheme. The talent that is emerging
through these initiatives is impressive. The continuing development of the
existing workforce is essential, so that each individual maximises their
potential, and 446 No. training days have been undertaken in the first quarter,
compared with 339 No. in 2008. HR initiatives to maintain the decline in
absenteeism and days off due to sickness continue to pay dividends.
Share prices in the construction sector declined dramatically in 2008, and it
was small consolation to note in a report undertaken by Contract Journal, that
your company's share was the second best performer in the sector in 2008. The
price has recovered since that nadir, and shareholder value and the maintenance
of an acceptable yield are major items on the Board's agenda. In the Board's
opinion, the market will remain extremely difficult into 2010, with particular
problems being experienced by the sector in the areas of credit insurance and
bonding facilities. The Group has successfully renewed its banking facilities
and has sufficient working capital for its current requirements. Two new
bondsmen have also been enlisted. Group budgets for 2009 are challenging but
your Board believes that they are achievable. In the longer term, confidence is
high that the blend of clients and frameworks, coupled with a strong reputation
for delivery to both time and budget will enable the Group to attain its growth
targets and emerge strongly from this recession.
Enquiries:
North Midland Construction plc 01623 515008
Robert Moyle, Chairman
Mike Garratt, Finance Director
This information is provided by RNS
The company news service from the London Stock Exchange
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