TIDMNMD
RNS Number : 2557X
North Midland Construction PLC
09 August 2018
9 August 2018
Dissemination of a Regulatory Announcement that contains inside
information according to REGULATION (EU) No 596/2014 (MAR).
NORTH MIDLAND CONSTRUCTION PLC
UNAUDITED CONDENSED GROUP HALF YEARLY FINANCIAL STATEMENTS
North Midland Construction PLC (the "Company"), a leading
engineering and construction company, delivering major built
environment and critical national infrastructure projects across
the UK, announces interim results for the six months ended 30 June
2018.
Highlights:-
Six Months Six Months
Ended Ended
30 June 2018 30 June 2017
GBP'000 GBP'000
Restated(1)
Revenue 160,859 135,148
------------- -------------
Profit Before Tax 2,512 1,234
Total Comprehensive
Income 2,035 993
------------- -------------
Earnings per Share 20.05p 9.78p
------------- -------------
Proposed Dividends 6.0p 3.0p
------------- -------------
(1) Comparative information has been restated following the
adoption of IFRS 15 Revenue from Contracts with Customers on 1
January 2018. Further information concerning the impact of the
transition to IFRS 15 is provided in Note 3.
o Revenue increased by 19.0% compared with H1 2017.
o Profit before tax increased by 103.6% to GBP2.51 million (H1
FY17 restated: GBP1.23 million).
o Cash of GBP18.89 million, an increase of 138.4% (H1 FY17:
GBP7.93 million)
o Current order book for completion in 2018 of GBP320m (H1 FY17:
GBP270 million)
o Increased proposed dividend to 6.0p (H1 FY17: 3.0p)
John Homer - Chief Executive - Commented:
"These results demonstrate the continued progress made in the
business against our strategic objectives. Our focus on margin
enhancement (104% ahead of last year) and cash generation (138%
ahead of last year) is beginning to show returns and is anticipated
to continue going forward.
We continue to invest significantly in the development of our
people and the evolution of our employer brand. It is our firm
belief that our people are the overarching differentiator in the
service that we provide and the primary driver for our continued
success.
The outlook for future trading remains positive and provides the
opportunity to maximise earnings from our operations. The board is
anticipating further revenue growth coupled with an enhanced margin
percentage."
For further information:-
John Homer, Chief Executive
Daniel Taylor, Group Finance
Director
01623 515008
North Midland Construction
PLC
CHAIRMAN'S STATEMENT
It is pleasing to report that the progress outlined at the
Annual General Meeting on 17 May 2018 has been maintained. Half
year profitability before tax has improved to GBP2.51 million (H1
FY17 restated: GBP1.23 million) on revenues which increased by
19.0% to GBP160.86 million (H1 FY17 restated: GBP135.15
million).
The Built Environment segment, in spite of ongoing losses in
Telecoms, produced an improved performance in the second quarter,
although the half-year result shows a deterioration compared with
the same period last year. Revenues declined by 3.4% to GBP48.79
million (H1 FY17 restated: GBP50.51 million) due to reduced
infrastructure expenditure by the Telecommunications companies. An
operating loss of GBP2k was delivered (H1 FY17 restated: GBP0.34
million).
Construction has maintained its excellent progress producing an
operating profit of GBP1.22 million (H1 FY17 restated: GBP0.08
million) on revenues increased by 95.4% to GBP21.88 million (H1
FY17 restated: GBP11.20 million). The initial "NM Investments"
project, which is a joint venture to develop 10 houses in
Nottingham, is progressing well and on programme with a second
development due to commence on site in the near future. Confidence
is high that the predicted return for the full financial year will
be achieved.
Highways has enhanced its margins with profitability increasing
to GBP0.39 million (H1 FY17 restated: GBP0.23 million) on revenues
reduced by 34.7% to GBP13.90 million (H1 FY17 restated: GBP21.27
million). The opportunities for orders emanating from the existing
frameworks have been slow to materialise and there is a requirement
to secure further workload this year.
Telecoms continues to be loss-making on the back of reduced
levels of activity. A loss of GBP1.61 million (H1 FY17 restated:
GBP0.03 million profit) was generated on revenues reduced by 27.8%
to GBP13.02 million (H1 FY17 restated: GBP18.04 million). A
restructure of the division to improve operating performance and
align the business to the reduced levels of expenditure is still
ongoing.
The Water segment continues to provide growth in both revenue
and earnings on the back of peak levels of investment by the water
companies in the middle of the AMP6 programme, coupled with the
high levels of activity on the major joint venture projects
currently under construction. Operating profit advanced to GBP2.57
million (H1 FY17 restated: GBP1.00 million) on revenues increased
by 32.4% to GBP112.07 million (H1 FY17 restated: GBP84.64 million).
A maintained performance is forecast for the full financial
year.
In relation to the one remaining outstanding legacy contract
with Cyden Homes Limited, upon the advice of Leading Counsel and
the Company's retained legal advisors and having received
permission to appeal to the Court of Appeal in what were regarded
as positive terms, the Board pursued an appeal against the decision
of The High Court in relation to the application of "the prevention
principal". The Appeal was heard on the 12 July 2018 but
unfortunately the outcome was unfavourable for the Company. As a
consequence, alternative strategies for making appropriate recovery
under this contract which had already been designed in parallel are
now being fully implemented. The financial impact of this decision
had already been recognised in our 2017 accounts and will not
affect current projections.
The improvement in both profitability and cash collection has
resulted in a significant enhancement of the half-year bank
position with current cash at 30 June 2018 being GBP18.89 million
(H1 FY17 restated: GBP7.93 million).
The current order book for completion this year is GBP320m
(2017: GBP270m) and the secured workload for the subsequent year
leads the Board to be confident that this year's forecast will be
achieved. This, coupled with the desire to pursue a progressive
dividend policy, has encouraged the Board to double the interim
dividend to 6.0p per share (H1 FY17: 3.0p per share). The dividend
will be paid on 14 September 2018 to shareholders on the register
at 17 August 2018.
Robert Moyle
Chairman
North Midland Construction PLC
9 August 2018
UNAUDITED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
The unaudited condensed Group results for the half year ended 30
June 2018 are shown below together with the unaudited Group results
for the half year ended 30 June 2017 and the audited (restated)
Group results for the year ended 31 December 2017.
Six Months Ended 30 June Year Ended
31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Restated Restated
Revenue 160,859 135,148 299,879
Other operating income 291 133 451
------------- ------------ ------------
161,150 135,281 300,330
Raw material and consumables (24,509) (22,838) (44,698)
Other external charges (91,636) (73,048) (168,462)
Employee costs (38,116) (33,799) (69,486)
Depreciation of property,
plant and equipment (1,778) (1,489) (3,057)
Other operating charges (2,543) (2,768) (5,327)
------------- ------------ ------------
Operating profit 2,568 1,339 9,300
Finance costs (56) (105) (187)
------------- ------------ ------------
Profit before tax 2,512 1,234 9,113
Tax (Note 7) (477) (241) (1,884)
------------- ------------ ------------
Profit for the period 2,035 993 7,229
Other comprehensive income - - -
------------- ------------ ------------
Total comprehensive income
for the period 2,035 993 7,229
============= ============ ============
Attributed to:-
Equity holders of the parent 2,035 993 7,229
------------- ------------ ------------
2,035 993 7,229
============= ============ ============
Earnings per share basic
and diluted (Note 6) 20.05p 9.78p 71.22p
Dividend per share (Note
8) 6p 3p 3p
UNAUDITED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Capital
Share Merger Redemption Retained
Capital Reserve Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2017 as previously
reported 1,015 455 20 11,209 12,699
Adjustment on adoption
of IFRS 15 (Note 3.3) - - - (6,487) (6,487)
Balance at 1 January
2017 as restated 1,015 455 20 4,722 6,212
Profit and total comprehensive
income for the period
as restated (Note 3.3) - - - 993 993
Dividends paid - - - (303) (303)
-------- -------- ----------- --------- --------
Balance at 30 June
2017 as restated 1,015 455 20 5,412 6,902
Profit and total comprehensive
income for the period
as restated (Note 3.3) - - - 6,236 6,236
Dividends paid - - - (305) (305)
Balance at 31 December
2017 1,015 455 20 11,343 12,833
Profit and total comprehensive
income for the period - - - 2,035 2,035
Dividends paid - - - (305) (305)
-------- -------- ----------- --------- --------
Balance at 30 June
2018 1,015 455 20 13,073 14,563
======== ======== =========== ========= ========
UNAUDITED CONDENSED GROUP BALANCE SHEET
The unaudited condensed Group Balance Sheets as at 30 June 2018
and 30 June 2017 are shown below together with the audited
(restated) Group Balance Sheet as at 31 December 2017.
30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Assets Restated Restated
Non-Current Assets
Property, plant and equipment 18,147 14,975 17,122
Investments in joint ventures 75 - -
Deferred tax asset 883 2,820 1,223
19,105 17,795 18,345
-------- --------- ------------
Current Assets
Inventories 1,539 1,950 1,820
Trade and other receivables 63,014 50,896 49,934
Cash and cash equivalents 18,891 7,925 17,006
-------- --------- ------------
83,444 60,771 68,760
-------- --------- ------------
Total Assets 102,549 78,566 87,105
======== ========= ============
Equity and Liabilities
Capital and Reserves attributable
to equity holders of the
Parent
Share capital 1,015 1,015 1,015
Merger reserve 455 455 455
Capital redemption reserve 20 20 20
Retained earnings 13,073 5,412 11,343
-------- --------- ------------
Total Equity 14,563 6,902 12,833
======== ========= ============
Liabilities
Non-current Liabilities
Obligation under finance
leases
- due after one year 2,122 2,703 2,514
Provisions 401 394 404
2,523 3,097 2,918
-------- --------- ------------
Current Liabilities
Trade and other payables 82,772 66,048 68,726
Current income tax payable 312 219 177
Obligations under finance
leases
- due within one year 2,379 2,300 2,451
85,463 68,567 71,354
-------- --------- ------------
Total Liabilities 87,986 71,664 74,272
-------- --------- ------------
Total Equity and Liabilities 102,549 78,566 87,105
======== ========= ============
UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS
The unaudited condensed Group statement of cash flows for the
periods ended 30 June 2018 and 30 June 2017 are shown below
together with the audited (restated) Group statement of cash flows
for the year ended 31 December 2017.
Six Months Ended 30
June Year Ended
31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Restated Restated
Cash flows from operating activities
Operating profit 2,568 1,339 9,300
Adjustments for:
Depreciation of property, plant
and equipment 1,778 1,489 3,057
Gain on disposal of property,
plant and equipment (293) (130) (448)
(Decrease)/increase in provisions (3) - 10
Operating cash flows before
movements in
working capital 4,050 2,698 11,919
Decrease in inventories 284 115 245
Increase in receivables (13,080) (9,135) (8,173)
Increase in payables 14,046 4,903 7,581
Cash generated from/(used in)
operations 5,300 (1,419) 11,572
Income tax paid - - (91)
Interest paid (4) (49) (79)
---------- ---------- ------------
Net cash generated from/(used
in) operations 5,296 (1,468) 11,402
Cash flows from investing activities
Purchase of property, plant and
equipment (1,953) (444) (2,897)
Proceeds on disposal of property,
plant and equipment 550 132 580
Investment in joint ventures (75) - -
---------- ---------- ------------
Net cash used in investing
activities (1,478) (312) (2,317)
Cash flows from financing activities
Equity dividends paid (305) (303) (608)
Repayments of obligations under
finance leases (1,575) (1,341) (2,768)
Interest payable under finance
leases (53) (56) (108)
---------- ---------- ------------
Net cash used in financing
activities (1,933) (1,700) (3,484)
Net (decrease)/increase in cash
and cash equivalents 1,885 (3,480) 5,601
Cash and cash equivalents at
1 January 2018 17,006 11,405 11,405
---------- ---------- ------------
Cash and cash equivalents at
30 June 2018 18,891 7,925 17,006
========== ========== ============
1. Basis of preparation
The unaudited condensed Group 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 Financial Reporting Standards
(IFRSs) as adopted by the European Union. They do not include
all of the information required for full annual financial statements.
These condensed consolidated half-yearly financial statements
have not been subject to audit or review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 by the Company's
auditor, 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 2017. The comparative figures
for the year ended 31 December 2017 are not the Group's statutory
accounts for that financial year. Those accounts have been reported
upon by the Group's auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified, did not
include a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying their report and did not
contain statements under Section 435 and 498 (2) or (3) respectively
of the Companies Act 2006.
The Board regularly reviews financial statements, cash balances
and forecasts and the Directors confirm that they consider the
Group has adequate resources to continue to operate for the foreseeable
future. Accordingly, they continue to adopt the going concern
basis in preparing the unaudited condensed Group half yearly financial
statements.
This is the first set of the Group's financial statements where
IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial
Instruments' have been applied. Changes to significant accounting
policies are described in Note 3.
2. Use of judgements and estimates
The preparation of unaudited condensed Group half-yearly financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates.
In preparing these unaudited condensed Group half-yearly financial
statements, the significant judgements made by management in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements as at and for the year ended 31 December
2017.
The Group's financial risk management objectives and policies
are consistent with those disclosed in the consolidated financial
statements as at and for the year ended 31 December 2017.
3.1. Changes in significant accounting policies
Except as described below, the accounting policies adopted in
the preparation of the unaudited condensed Group half-yearly financial
statements to 30 June 2018 are consistent with the policies applied
by the Group in its consolidated financial statements as at, and
for the year ended 31 December 2017. The changes in accounting
policies are also expected to be reflected in the Group's consolidated
financial statements as at and for the year ending 31 December
2018. The Group has considered amendments to existing standards
and interpretations that are effective for the year ending 31
December 2018 and is of the view that they have no impact on the
unaudited condensed Group half-yearly accounts, except as noted
below for IFRS 15 and IFRS 9.
3.2. IFRS 15 Revenue from Contracts with Customers - overview
The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers from 1 January 2018.
IFRS 15 provides a single, principles-based five-step model to
be applied to all sales contracts, based on the transfer of control
of goods and services to customers. It replaces the separate models
for goods, services and construction contracts previously included
in IAS 11 Construction Contracts and IAS 18 Revenue. The effect
of initially applying IFRS 15 is mostly attributed to the recognition
criteria for variable income, which arises principally from variations
in contract work, claims and incentive payments. Variable income
is subject to a revenue constraint such that revenue may only
be recognised to the extent that it is highly probable that a
significant reversal in the amount of revenue recognised will
not occur in future. Under IAS 11 an amount was included in contract
revenue to the extent that it was probable that it would result
in revenue, which required a lower level of certainty than under
IFRS 15. As a result, revenue may be recognised later under IFRS
15 than under IAS 11.
The Group has applied IFRS 15 retrospectively using the practical
expedient in paragraph C5(c) of IFRS 15, under which the Group
does not disclose the amount of consideration allocated to the
remaining performance obligations or an explanation of when the
Group expects to recognise that amount as revenue for all reporting
periods presented before the date of initial application - i.e.
1 January 2018.
3.3. IFRS 15 Revenue from Contracts with Customers - restatement
The following tables summarise the impacts of adopting IFRS 15
on the Group's condensed half-yearly financial statements, with
references to the specific accounting policy changes to which
those adjustments relate in Note 3.4.
Impact on the condensed Group statements of comprehensive income
Six Months Ended 30 Year Ended 31 December
June 2017 2017
As Reported Adjustment Restated As Reported Adjustment Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accounting policy change C C
per Note 3.4
Revenue 135,134 14 135,148 291,770 8,109 299,879
Other operating income 133 - 133 451 - 451
------------ ----------- --------- ------------ ----------- ----------
135,267 14 135,281 292,221 8,109 300,330
Raw material and consumables (22,838) - (22,838) (44,698) - (44,698)
Other external charges (73,048) - (73,048) (168,462) - (168,462)
Employee costs (33,799) - (33,799) (69,486) - (69,486)
Depreciation of property,
plant and equipment (1,489) - (1,489) (3,057) - (3,057)
Other operating charges (2,768) - (2,768) (5,327) - (5,327)
------------ ----------- --------- ------------ ----------- ----------
Operating profit 1,325 14 1,339 1,191 8,109 9,300
Finance costs (105) - (105) (187) - (187)
------------
Profit before tax 1,220 14 1,234 1,004 8,109 9,113
Tax (Note 7) (238) (3) (241) (262) (1,622) (1,884)
------------ ----------- --------- ------------ ----------- ----------
Profit for the period 982 11 993 742 6,487 7,229
Other comprehensive income - - - - - -
------------ ----------- --------- ------------ ----------- ----------
Total comprehensive income
for the period 982 11 993 742 6,487 7,229
============ =========== ========= ============ =========== ==========
3.3. IFRS 15 Revenue from Contracts with Customers - restatement (continued)
Impact on the condensed Group balance sheets
1 January 2017 30 June 2017
As Reported Adjustments Restated As Reported Adjustments Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accounting policy C F C F
change per Note
3.4
Assets
Non-current assets
Property, plant
and equipment 13,651 - - 13,651 14,975 - - 14,975
Investments in - - - - - - - -
subsidiaries
Deferred tax asset 1,411 1,622 - 3,033 1,201 1,619 - 2,820
------------ -------- --------- --------- ------------ -------- -------- ---------
15,062 1,622 - 16,684 16,176 1,619 - 17,795
------------ -------- --------- --------- ------------ -------- -------- ---------
Current assets
Inventories 2,065 - - 2,065 1,950 - - 1,950
Construction contracts 19,165 (8,109) (11,056) - 18,048 (8,095) (9,953) -
Trade and other
receivables 30,705 - 11,056 41,761 40,943 - 9,953 50,896
Current income - - - - - - - -
tax receivable
Cash and cash
equivalents 11,405 - - 11,405 7,925 - - 7,925
------------ -------- --------- --------- ------------ -------- -------- ---------
63,340 (8,109) - 55,231 68,866 (8,095) - 60,771
------------ -------- --------- --------- ------------ -------- -------- ---------
Total assets 78,402 (6,487) - 71,915 85,042 (6,476) - 78,566
============ ======== ========= ========= ============ ======== ======== =========
Equity and liabilities
Capital and reserves
attributable to
equity holders
of the Parent
Share capital 1,015 - - 1,015 1,015 - - 1,015
Merger reserve 455 - - 455 455 - - 455
Capital redemption
reserve 20 - - 20 20 - - 20
Retained earnings 11,209 (6,487) - 4,722 11,888 (6,476) - 5,412
------------ -------- --------- --------- ------------ -------- -------- ---------
Total equity 12,699 (6,487) - 6,212 13,378 (6,476) - 6,902
============ ======== ========= ========= ============ ======== ======== =========
Liabilities
Non-current liabilities -
Obligations under
finance leases 1,785 - - 1,785 2,703 - - 2,703
Provisions 394 - - 394 394 - - 394
------------ -------- --------- --------- ------------ -------- -------- ---------
2,179 - - 2,179 3,097 - - 3,097
------------ -------- --------- --------- ------------ -------- -------- ---------
Current liabilities
Trade and other
payables 61,145 - - 61,145 66,048 - - 66,048
Current income
tax payable 194 - - 194 219 - - 219
Obligations under
finance leases 2,185 - - 2,185 2,300 - - 2,300
------------ -------- --------- --------- ------------ -------- -------- ---------
63,524 - - 63,524 68,567 - - 68,567
------------ -------- --------- --------- ------------ -------- -------- ---------
Total liabilities 65,703 - - 65,703 71,664 - - 71,664
Total equity and
liabilities 78,402 (6,487) - 71,915 85,042 (6,476) - 78,566
============ ======== ========= ========= ============ ======== ======== =========
3.3. IFRS 15 Revenue from Contracts with Customers - restatement (continued)
Impact on the condensed Group statements of cash flows
Six Months Ended 30 June
2017 Year Ended 31 December 2017
As Reported Adjustments Restated As Reported Adjustments Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Accounting policy C F C F
change per Note
3.4
Cash flows from operating activities
Operating profit 1,325 14 - 1,339 1,191 8,109 - 9,300
Adjustments for:
Depreciation of
PPE 1,489 - - 1,489 3,057 - - 3,057
Gain on disposal
of PPE (130) - - (130) (448) - - (448)
Increase in provisions - - - - 10 - - 10
Operating cash
flows before movements
in 2,684 14 - 2,698 3,810 8,109 - 11,919
working capital
Decrease in inventories 115 - - 115 245 - - 245
Decrease/(increase)
in construction
contracts 1,117 - (1,117) - (2,532) - 2,532 -
(Increase)/decrease
in receivables (10,238) (14) 1,117 (9,135) 2,468 (8,109) (2,532) (8,173)
Increase in payables 4,903 - - 4,903 7,581 - - 7,581
Cash (used in)/generated
from operations (1,419) - - (1,419) 11,572 - - 11,572
Income tax paid - - - - (91) - - (91)
Interest paid (49) - - (49) (79) - - (79)
------------ -------- -------- --------- ------------ -------- -------- ----------
Net cash (used
in)/generated
from operations (1,468) - - (1,468) 11,402 - - 11,402
Cash flows from investing activities
Purchase of PPE (444) - - (444) (2,897) - - (2,897)
Proceeds on disposal
of PPE 132 - - 132 580 - - 580
------------ -------- -------- --------- ------------ -------- -------- ----------
Net cash used
in investing activities (312) - - (312) (2,317) - - (2,317)
Cash flows from financing activities
Equity dividends
paid (303) - - (303) (608) - - (608)
Repayments of
obligations under
finance leases (1,341) - - (1,341) (2,768) - - (2,768)
Interest payable
under finance
leases (56) - - (56) (108) - - (108)
------------ -------- -------- --------- ------------ -------- -------- ----------
Net cash used
in financing activities (1,700) - - (1,700) (3,484) - - (3,484)
Net (decrease)/increase
in cash and cash
equivalents (3,480) - - (3,480) 5,601 - - 5,601
Cash and cash
equivalents at
1 January 2018 11,405 - - 11,405 11,405 - - 11,405
------------ -------- -------- --------- ------------ -------- -------- ----------
Cash and cash
equivalents at
30 June 2018 7,925 - - 7,925 17,006 - - 17,006
============ ======== ======== ========= ============ ======== ======== ==========
3.4. IFRS 15 Revenue from Contracts with Customers - changes in accounting
policy
The details of the new significant accounting policies and the
nature of the changes to previous accounting policies in relation
to the Group's adoption of IFRS 15 Revenue from Contracts with
Customers are set out below.
Amended accounting policy Nature of change in accounting
policy
A A contract is considered to The Group's contracts with
exist with a customer where customers as defined under
there is an agreement in place IFRS 15 correspond in almost
that creates enforceable rights all circumstances to construction
and obligations on both parties contracts as previously defined
to the contract. For each under IAS 11. Groups of performance
distinct contract identified, obligations negotiated as
the transaction price is determined a single framework were previously
by reference to the total accounted for as an aggregated
amount of consideration to single construction contract,
which the Group expects to which is analogous to the
be entitled in exchange for application of the portfolio
the provision of services model under the amended accounting
under the contract. A performance policy.
obligation is considered to
exist where there is an explicit The transaction price under
or implicit promise within the amended accounting policy
the contract to transfer distinct corresponds to the value of
services to the customer, contract revenue as measured
or there is a promise to transfer under the previous accounting
a series of services that policy, less the value of
are substantially the same items now classified as variable
and have the same pattern income under IFRS 15 such
of transfer to the customer. as variations in contract
The transaction price is allocated work, claims and incentive
to performance obligations payments (see below).
by reference to the stand-alone
selling price of the service
promised under that performance
obligation or, where there
is no observable stand-alone
selling price, the transaction
price is allocated on the
basis of the expected cost
plus margin to provide the
service.
Where contracts that contain
multiple performance obligations
are performed on a concurrent
or continuous basis and are
so closely interrelated that
in effect they are part of
a single project that is negotiated
as a single framework with
a single profit margin, they
are accounted for by applying
the portfolio model to groups
of performance obligations.
------------------------------------- -------------------------------------
B Where the customer controls Where the outcome of a construction
the asset as it is constructed contract could be estimated
or enhanced, services are reliably, revenue and costs
considered to be transferred were recognised by reference
over time and the transaction to the stage of completion
price allocated to the associated of activity at the balance
performance obligation is sheet date. This was normally
recognised as revenue by reference measured by reference to the
to the stage of completion proportion of contract costs
of activity at the balance incurred for work performed
sheet date. This is normally to date to the estimated total
measured by the proportion contract costs (the "cost
that contract costs incurred to cost" method).
for work performed to date Where the outcome of a construction
bear to the estimated total contract could not be estimated
costs of satisfying the performance reliably, contract revenue
obligation. Where a performance was recognised to the extent
obligation is not considered of contract costs incurred
to be satisfied over time, that it is probable would
the transaction price allocated be recoverable.
to the performance obligation The Group's construction contracts
is recognised as revenue when typically involve the transfer
the promised service is delivered of services over time, therefore
to the customer. there is no financial impact
associated with adopting this
aspect of the amended accounting
policy as the recognition
of revenue continues to take
place under the cost to cost
method.
------------------------------------- -------------------------------------
3.4. IFRS 15 Revenue from Contracts with Customers - changes in accounting
policy (continued)
Amended accounting policy Nature of change in accounting
policy
C Variations in contract work, Variations in contract work,
claims, incentive payments claims and incentive payments
and other categories of variable were previously recognised
income are recognised in the to the extent that it was
transaction price only to probable that they would result
the extent that it is highly in revenue and that they were
probable that a significant capable of being reliably
reversal in the amount of measured.
cumulative revenue recognised The amended accounting policy
will not occur. reflects the requirement under
IFRS 15 to recognise revenue
only when it is highly probable
that a significant reversal
will not occur, which is a
higher level of certainty
than was previously required
under IAS 11. Consequently,
this has led to an adjustment
to Group retained earnings
as at 1 January 2017 and profit
and total comprehensive income
for the six months ended 30
June 2017 and the year ended
31 December 2017.
------------------------------------- -----------------------------------
D Incremental costs to obtain Contract costs were previously
a contract such as tender recognised as expenses in
costs are capitalised and the period in which they were
amortised consistently with incurred, including costs
the transfer of the services of obtaining a contract to
to which the asset relates. the extent that recoverability
Other costs including the under the contract was probable.
costs of satisfying the performance There is no material financial
obligations under a contract impact associated with adopting
are recognised as expenses this aspect of the amended
in the period in which they accounting policy due to the
are incurred. amount of pre-contract costs
incurred historically. Costs
to obtain contracts in future
may however be capitalised
and amortised in line with
the amended accounting policy
where the amounts involved
are material.
------------------------------------- -----------------------------------
E Where it is anticipated that Where it was anticipated that
total contract costs will total contract costs would
exceed total contract revenue, exceed total contract revenue,
a provision is recognised the expected loss was recognised
in respect of the expected as an expense immediately.
loss under the contract. The requirements of the previous
and amended accounting policies
are similar and hence there
is no financial impact associated
with adopting this aspect
of the amended accounting
policy.
------------------------------------- -----------------------------------
3.4. IFRS 15 Revenue from Contracts with Customers - changes in accounting
policy (continued)
Amended accounting policy Nature of change in accounting
policy
F Trade receivables includes The recoverable sales value
applications to the extent of work carried out at the
that there is an unconditional balance sheet date, which
right to payment and the amount had not been applied for,
has been certified by the was previously recognised
customer. The recoverable as construction contracts
amount of applications that in the balance sheet.
have not been certified and Trade receivables included
other amounts that have not unpaid applications both certified
been applied for but represent and uncertified. Applications
the recoverable value of work and certificates were reduced
carried out at the balance accordingly based on the stage
sheet date are recognised of completion of a contract
as contract assets within when compared to the cash
trade and other receivables received at the balance sheet
on the balance sheet. Retentions date.
are included in trade and The amended accounting policy
other receivables and are reflects the requirement under
stated at their original invoiced IFRS 15 to recognise all contract
value, as the interest that balances as contract assets
would be recognised from discounting or contract liabilities, other
future cash receipts over than any unconditional rights
the short credit period is to consideration which are
not considered to be material. presented as receivables.
The contract costs incurred Consequently, this has led
in relation to work completed to the creation of a new category
at the balance sheet date, of asset ("contract assets")
net of progress buying on within trade and other receivables,
construction contracts, is which now includes amounts
recognised in trade payables. previously held as trade receivables
In addition, any payments or construction contracts
received in advance of completing on the balance sheet.
the work are also recognised
in trade payables.
-------------------------------------- --------------------------------------
3.5. IFRS 9 Financial Instruments
The Group has initially adopted IFRS 9 Financial Instruments from
1 January 2018.
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments:
Recognition and Measurement and specifies how an entity should
classify and measure financial assets, financial liabilities,
and some contracts to buy or sell non-financial items. The most
significant area of change which could potentially have an effect
on the Group's reported results is the "expected loss" model,
under which an allowance for credit losses is calculated by considering
the cash shortfalls that would be incurred in various default
scenarios and multiplying the shortfalls by the probability of
each scenario occurring.
Based on an assessment of historic credit losses on the Group's
financial assets and the likelihood of the occurrence of future
credit losses on existing financial assets, the Directors consider
that there are no further material impairment losses to be recognised
against the Group's financial assets.
The details of the new significant accounting policies and the
nature of the changes to previous accounting policies in relation
to the Group's adoption of IFRS 9 Financial Instruments are set
out below.
Amended accounting policy Nature of change in accounting
policy
On initial recognition, a financial asset is classified as IFRS 9 removes the previous IAS 39
measured at amortised cost, Fair categories for financial assets of
Value through Other Comprehensive Income ("FVOCI") or Fair held to maturity, loans
Value Through Profit or Loss ("FVTPL"). and receivables and available for
Financial liabilities are measured at amortised cost or sale. These are replaced by the
FVTPL. categories noted in the
All financial instruments are initially measured at fair amended accounting policy for
value. financial instruments.
The classification of financial instruments is based on the IFRS 9 retains the existing
manner in which a financial instrument requirements in IAS 39 for the
is managed and its contractual cash flow characteristics. classification and measurement
Financial assets and liabilities are measured at amortised of financial liabilities.
cost if both of the following conditions
are met and the financial asset or liability is not
designated as at FVTPL:
* the financial asset or liability is held with the
objective of collecting or remitting contractual cash
flows; and
* its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A financial asset is measured at FVOCI if it meets both of
the following conditions and is
not designated as at FVTPL:
* the financial asset is held with the objectives of
collecting contractual cash flows and selling the
financial asset; and
* its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All financial assets and financial liabilities not
classified as measured at amortised cost
or FVOCI as described above are measured at FVTPL.
-----------------------------------
3.5. IFRS 9 Financial Instruments (continued)
Amended accounting policy Nature of change in accounting
policy
The Group's principal financial instruments comprise cash and Cash and cash equivalents, trade
cash equivalents, trade receivables, receivables, retentions held by
retentions held by customers for contract work, contract assets, customers for contract work,
trade payables and interest-bearing trade payables and
borrowings (obligations under finance leases and bank interest-bearing borrowings were
overdraft). Based on the manner in which previously classified as loans and
these financial instruments are managed and their contractual receivables
cash flow characteristics, all under IAS 39 and were measured at
of the Group's financial instruments are measured at amortised amortised cost. These financial
cost using the effective interest instruments are now classified
method. as financial assets and
The amortised cost of financial assets is reduced by impairment liabilities at amortised cost
losses as described below. under IFRS 9.
Interest income, foreign exchange gains and losses, impairments Contract assets are a new category
and gains or losses on derecognition of asset that is recognised as a
are recognised through the Statement of Comprehensive Income. result of the adoption
Trade receivables, retentions held by customers for contract of IFRS 15. Amounts recognised as
work and trade payables are held contract assets were previously
at their original invoiced value, as the interest that would be recognised within trade
recognised from discounting receivables and construction
future cash flows over the short credit period is not considered contracts as described in the
to be material. changes in significant accounting
Contract assets are measured at the recoverable amount of policies - IFRS 15 Revenue from
applications that have not been Contracts with Customers section
certified and other amounts that have not been applied for but of note 3.
represent the recoverable value The adoption of IFRS 9 has
of work carried out at the balance sheet date. therefore not had any impact on
Cash equivalents comprise short-term highly liquid investments the measurement of the Group's
that are readily convertible financial assets and liabilities.
into known amounts of cash and which are subject to an
insignificant risk of changes in value.
An investment with a maturity of three months or less is
normally classified as being short
term. Cash and cash equivalents do not include other financial
assets.
-----------------------------------
Impairment losses against financial assets at amortised cost are IFRS 9 replaces the incurred loss
recognised by reference to model in IAS 39 with the expected
any expected credit losses against those assets. Allowances for credit loss model, which
credit losses are calculated requires that future events are
by considering on a discounted basis the cash shortfalls it taken into account when
would incur in various default calculating impairments to
scenarios over the remaining lives of the assets and multiplying financial
the shortfalls by the probability assets.
of each scenario occurring. The allowance is the sum of these Based on an assessment of historic
probability weighted outcomes. credit losses on the Group's
financial assets and the
likelihood
of the occurrence of future credit
losses on existing financial
assets, the Directors consider
that there are no further material
impairment losses to be recognised
against the Group's
financial assets due to the
adoption of the amended accounting
policy.
-----------------------------------
4. Segment reporting
From 1 January 2018 the Board now reviews the Group's operational
performance via two segments: the Water segment and the Built
Environment segment. Accordingly, the segmental information
presented below is prepared on the same basis and the previous
years restated for comparison purposes.
Segment revenue and profit
Six Months Ended 30 June 2018
Built Environment Water Total
GBP'000 GBP'000 GBP'000
Revenue 48,786 112,073 160,859
================== ======== ========
Result before corporate
expenses 3,227 9,043 12,270
Corporate expenses (3,229) (6,473) (9,702)
Operating (loss)/profit (2) 2,570 2,568
================== ========
Net finance costs (56)
--------
Profit before tax 2,512
Tax (477)
--------
Total comprehensive income for the period 2,035
========
Six Months Ended 30 June 2017
Built Environment Water Total
GBP'000 GBP'000 GBP'000
Restated Restated Restated
Revenue 50,506 84,642 135,148
================== ========= =========
Result before corporate
expenses 2,845 6,265 9,110
Corporate expenses (2,507) (5,264) (7,771)
Operating profit 338 1,001 1,339
================== =========
Net finance costs (105)
---------
Profit before tax 1,234
Tax (241)
---------
Total comprehensive income for the period 993
=========
Segment assets
30 June
2018 2017
GBP'000 GBP'000
Restated
Built Environment 44,501 45,390
Water 58,048 39,652
Total segment assets and consolidated total
assets 102,549 85,042
========= ==========
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.
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
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
Restated Restated
Built Environment 674 695 1,161 1,309
Water 1,104 794 1,902 1,494
1,778 1,489 3,063 2,803
=========== ========== ======== ===============
There were no impairment losses recognised in respect of property,
plant and equipment.
All of the above relates to continuing operations and arose
in the United Kingdom.
5. Revenue from contracts with customers
The following table shows the Group's revenue from contracts
with customers, disaggregated into major classes of revenue
and reconciled to the amount of revenue reported for the Group's
reportable segments (Note 4).
Six Months Ended 30 June 2018
Built Environment Water Total
GBP'000 GBP'000 GBP'000
Construction 21,880 - 21,880
Highways 13,885 - 13,885
Telecommunications 13,021 - 13,021
Nomenca - 32,150 32,150
NMCNomenca - 79,923 79,923
48,786 112,073 160,859
====================== =========== ==========
Six Months Ended 30 June 2017
Built Environment Water Total
GBP'000 GBP'000 GBP'000
Restated Restated Restated
Construction 11,201 - 11,201
Highways 21,266 - 21,266
Telecommunications 18,039 - 18,039
Nomenca - 27,014 27,014
NMCNomenca - 57,628 57,628
50,506 84,642 135,148
====================== =========== ==========
Revenues of approximately GBP79,044,000 (2017: GBP55,483,000)
within the Water segment were derived from a single external
customer.
6. Earnings per share
The basic and diluted earnings per share are the same and have
been calculated on profits of GBP2,035,000 (2017 restated: profits
of GBP993,000) and a weighted average number of shares in issue
of 10,150,000 (2017: 10,150,000).
7. Taxation
In respect of the six months ended 30 June 2018, the corporation
tax effective rate was 19% (2017: 19.5%). A corporation tax
provision has been included in relation to the taxable profits
of the Company.
8. Dividends
Amounts recognised as distributions to equity holders in the
half year:-
Six Months
to 30 June
2018 2017
GBP'000 GBP'000
Final dividend for the year ended 31 December 2017
of 3.0p (2016: 3.0p) per share. 305 303
======== ========
The Directors propose an interim dividend of 6.0p (2017: 3.0p)
per share, total GBP609,000 (2017: GBP305,000), which will be
paid on 14 September 2018 to the shareholders on the register
at 17 August 2018.
9. Related parties
The Group's related parties are key management personnel who are
the executive directors, non-executive directors and divisional
leaders.
10. Contingent liabilities
Lloyds Bank PLC, Aviva Insurance Limited and HCC International
Insurance Co. Ltd have given Performance Bonds to a value of GBP8,654,000
(2017: GBP9,360,000) on the Group's behalf. These bonds have been
made with recourse to the Group.
11. Seasonality
The Group's activities are not subject to significant seasonal
variations.
12. Principal risks and uncertainties
The Board consider the principal risks and uncertainties relating
to the Group for the next six months to be the same as detailed
in the last Annual Report and Accounts to 31 December 2017.
13. Responsibility Statement of the Directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements, which has been
prepared in accordance with IAS 34 and the ASB's 2007 statement
of Half Year Reports, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Group;
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules,
being an indication of important events that have occurred
during the first six months of the financial year and
their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties
for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules,
being related party transactions that have taken place
in the first six months of the current financial year
and that have materially affected the financial position
or performance of the entity during that period; and
any changes in the related party transactions described
in the last annual report that could do so.
J Homer
Chief Executive
D A Taylor
Group Finance Director
9 August 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QVLFBVVFBBBD
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