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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Nth.Mid.Cons | LSE:NMD | London | Ordinary Share | GB0006452857 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 530.00 | 510.00 | 550.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
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
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