North Midland Construction PLC Pre-close Trading update & Notice of Final Results (8526C)

TIDMNMD

RNS Number : 8526C

North Midland Construction PLC

25 January 2018

North Midland Construction PLC

25 January 2018

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

North Midland Construction PLC

("North Midland Construction" or the "Group" or the "Company")

Pre-close Trading update and Notice of Final Results

North Midland Construction announces an unaudited trading update ahead of its close period prior to the announcement of its audited final results for the year ended 31 December 2017.

Trading update

The Directors of North Midland Construction ("the Directors") believe that unaudited revenue for the year 31 December 2017 will be in line with their expectations, and approximately 18 per cent ahead of last year. However, a post year-end review of the continuing operating segments' performance for 2017, following on from a review started in the previous year of the potential outcome of all work in progress and, in particular, the legacy contractual dispute (which is the subject of continued court action, explained further below) has meant that the Directors have decided to reduce their earnings expectations for the year-ended 31 December 2017. The Directors now believe that the Group will break even in the second half, but be profitable for the year as a whole at the pre-tax level. Unaudited underlying profit (*see note below) is significantly ahead of 2016, due to an exceptional performance in the continuing operating segments for the year.

The Group's unaudited cash balance, as at 31 December 2017, is approximately GBP17.0M (2016: GBP11.4M), and is testament to the strength of the continuing operating segments. In addition, the current order book for construction in 2018, stands at approximately GBP257M which is just under 80% of the Directors' revenue expectations for the current year. The Group is targeting net margins of between 1.5 to 2.0 per cent for the full year and is committed to returning a steady dividend flow should these targets be met.

Legacy contractual dispute

As we have announced previously, the Group has been involved in a legacy contractual dispute. This dispute is with Cyden Homes Limited. Following a High Court ruling towards the end of last year, which did not support the application of the well-established 'prevention principle' in relation to this contract; the Company has been granted leave to appeal this decision by the Court of Appeal. On the advice of the Company's lawyers the Directors will vigorously pursue this appeal, but have decided to make a further provision against the outstanding debt. This matter will be kept under constant review and further announcements will be made if appropriate.

Contract with Carillion Telent

The Group has noted the announcement made by Carillion plc, that on 15 January 2018 it has been placed into compulsory liquidation. The Group's Telecommunications Division has a term contract with Carillion Telent (an unincorporated joint venture) in the East Midlands valued at approximately GBP3M per annum. Under the terms of the contract, money is owed to North Midland Construction for work in progress, outstanding debt and retention. The Group has had confirmation that Telent Technology Services Limited ("Telent") is taking over Carillion's share of the joint venture and that any money owed to North Midland Construction will remain the responsibility of Telent. The Group has had confirmation that contract and payment terms will remain unaltered and, to date, there has been no disruption to payments due to North Midland Construction.

The Group has no other contracts or projects with Carillion plc.

Notice of Final Results

The Company intends to announce its audited final results for the year ended 31 December 2017 on 28 March 2018.

John Homer, Chief Executive of North Midland Construction, commented:

"It is disappointing that focus on a healthy underlying Group performance from our continuing operations, which we expect to report on in late March 2018, appears to continue to be diverted by the outcome of this remaining legacy contract.

Going forward we have a good order book and a positive cash flow profile. We remain confident that our emphasis on careful contract selection, effective governance and continued investment in our employer brand will deliver the results required."

Note:

* - "underlying profit"

Annual Report & Accounts for the year ended 31 December 2016:

"Underlying profit is profit before tax, excluding legacy contract losses. Legacy contracts are construction contracts entered into at the height of the recession, before 31 December 2013, and which carried a high commercial and contracted risk. These contracts have negatively impacted the Group's income statement in 2013 and subsequent years."

Enquiries:

North Midland Construction PLC

   John Homer, Chief Executive                     01623 515 008 
   Dan Taylor, Finance Director                      01623 515 008 

This information is provided by RNS

The company news service from the London Stock Exchange

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January 25, 2018 02:00 ET (07:00 GMT)