Full year results for the year ended 30 September

10 December 2018

Nexus Infrastructure plc ("Nexus" or the "Group")

Full year results for the year ended 30 September 2018

 

Delivery of profits in line with management expectations and strong order book provides forward earnings visibility

 

Mike Morris, Chief Executive of Nexus, a leading provider of essential infrastructure services, utilities connections and electric vehicle infrastructure, comments:

"We are reporting today full year profits in line with our expectations and continued good strategic progress.

"Looking ahead, whilst there is continued general uncertainty posed by the forthcoming exit from the EU, the fundamental market growth drivers for our business are positive. Our continuing strong order book, which grew by 43% this year to £290m across a wider customer base, coupled with our strong balance sheet means Nexus is well positioned to deliver further growth."

Financial Highlights:

	2018	2017
Group revenue	£134.9m	£135.0m	-0.1%
Gross profit	£27.6m	£27.2m	+1.5%
Gross margin	20.5%	20.2%	+31 bps
Adjusted operating profit*	£9.4m	£9.3m	+1.1%
Profit before tax	£9.2m	£7.4m	+24.8%
Net cash	£20.0m	£18.7m	+7.0%
Basic earnings per share	19.1 p	15.4 p	+24.0%
Dividend per share	6.6 p	6.3 p	+4.8%

*Adjusted operating profit is stated prior to exceptional items

Operational Highlights:

·     Group Order book increased by 43% to £289.7m (2017: £202.7m)

o  Tamdown order book up 31% to £142.4m (2017: £108.3m)

o  TriConnex order book up 55% to £146.5m (2017: £94.4m)

·     £0.7m investment in nascent eSmart Networks division, launched in 2018 to capitalise on significant market opportunity  

·     Adjusted operating profit before the investment in eSmart Networks was £10.2m (2017: £9.3m), an increase of 8.8%

·     Tamdown revenues decreased by 2.9% to £102.5m (2017: £105.6m) reflecting the previously reported delays regarding site commencement

o  Gross profit maintained at £17.2m (2017: £17.3m)

o  Gross margin up by 40 basis points from 16.4% to 16.8%

o  Operating profit grew by 11.2% to £8.0m (2017: £7.2m)

·     TriConnex revenues up 9.3% to £32.2m (2017: £29.5m)

o  Gross profit up 4.9% to £10.4m (2017: £10.0m)

o  High gross margin maintained at 32.4% (FY 2017: 33.8%)

o  Operating profit up 7.2% to £3.7m (FY 2017: £3.5m)

·     eSmart Networks: Launched in June 2018. Delivered £0.3m in revenues in the period and is well positioned to capitalise on the significant market opportunity

Established growth strategy

·     Organic growth driven by large multi-phase contracts, geographic expansion and cross selling of Tamdown and TriConnex services

·     Customer diversification including growing into the build to rent markets and housing association developers

·     Building on the successful launch of eSmart networks

·     Inorganic growth plans focused on disciplined approach to bolt-on acquisitions

Board Appointment

·     Appointment of Ffion Griffith as Non-Executive Director post year end, effective 1 November 2018

 

Enquiries:

Nexus Infrastructure plc Michael Morris, Chief Executive Officer Alan Martin, Chief Financial Officer	Tel: 01376 320856
Numis Securities Limited (Nominated Adviser & Broker) Oliver Hardy (Nomad)                   Heraclis Economides      Ben Stoop	Tel: 0207 260 1200
Financial Public Relations Camarco Ginny Pulbrook Tom Huddart Oliver Head	Tel: 0203 757 4992

Notes to Editors:

 

Nexus is a leading provider of essential infrastructure services to the UK housebuilding and commercial sectors. The Group comprises: Tamdown, a provider of specialised civil engineering, infrastructure and concrete frame services; TriConnex which designs, installs and connects utility networks to properties on new residential and commercial developments; and eSmart Networks which focuses on electric vehicle charging and smart grid infrastructure.

 

Tamdown has a well-established market position having been in operation for over 40 years and currently counts amongst its customers nine of the top ten largest UK housebuilders. TriConnex was established in 2011 to take advantage of deregulation in the utilities market with the goal of being recognised as the UK's leading independent provider of utility connections to new developments.  eSmart Networks was set up in 2018 to respond to the UK's need for charging infrastructure as the transition from internal combustion engine vehicles to electric vehicles gathers pace.

 

 

CHAIRMAN'S STATEMENT

I am pleased to report the results for the year ended 30 September 2018.

Overview of the year

 

The Nexus business model, with Tamdown's well-established market position as a leading provider of essential infrastructure services to the UK's largest housebuilders, coupled with TriConnex's growing utilities connection business, was complemented this year by the creation of eSmart Networks, a provider of electric vehicle charging infrastructure, battery storage and specialised network services. 

The Group reported revenue for the year of £134.9m which is in-line with the previous year (2017: £135.0m). As previously reported, revenue growth in both Tamdown and TriConnex was held back by planning delays with clients either delaying the award of contracts or delaying commencement of works on site.  These planning delays are largely the result of pre-commencement conditions set by local authorities ahead of development.  The Government has recently updated the National Planning Policy Framework and associated planning legislation, to which local authorities are required to adhere, from October 2018. The Board believes that these changes in legislation should ultimately deliver a positive impact on our businesses.

The Group has continued to make good strategic progress and the Board is encouraged by the level of growth in the Group's order book which has been aided by growth in each division: Tamdown's order book is up by 31% to £142.4m, TriConnex's by 55% to £146.5m and eSmart Networks stands at £0.8m. The Group order book ended the year at £289.7m, a 43% year-on-year increase which provides Nexus with good visibility for the year ahead.  

The Group has also maintained disciplined and strong cost control resulting in operating profit improvements within Tamdown and TriConnex.  Group adjusted operating profit⁽¹⁾ improved by 1.1% to £9.4m (2017: £9.3m) and prior to the investment in eSmart Networks of £0.7m, Group adjusted operating profit increased by 8.8% to £10.2m (2017: £9.3m).  eSmart Networks was created during the year, as we consider there to be significant opportunities to provide electric vehicle charging infrastructure, battery storage and specialised distribution services, as the UK's need for charging infrastructure gathers pace with the transition from the internal combustion engine to electric vehicles accelerating.  eSmart Networks has made good progress in this new, rapidly evolving market.

The profit for the year attributable to equity holders of the parent company increased by 25.1% to £7.3m (2017: £5.8m) and the basic earnings per share increased to 19.1 p per share, an increase of 24.2% (2017: 15.4 p).

The Group is also pleased to report a continued high cash and cash equivalent balance of £26.4m (2017: £27.1m), resulting in net cash of £20.0m (2017: £18.7m).

Strategy

 

The Group's mission is to be recognised as a leading provider of essential infrastructure services in the UK. The Group's strategy is to deliver outstanding performance through a focus on innovation and customer service which will lead to profitable growth, building on existing market positions by developing new markets and services whilst extending geography, both organically and through complementary earnings enhancing acquisitions.

The Group's organic growth strategy is focused on four key drivers: increasing market share within our current geographies, expanding into new geographies, diversification into new growth sectors and leveraging client relationships to enhance cross-selling within the Group. In addition to organic growth, further growth will come from the successful sourcing, execution and integration of acquisitions.

The Group is taking a disciplined approach to acquisitions, seeking to enhance shareholder value with acquisitions that are linked or closely associated with TriConnex or eSmart Networks.

Returns to shareholders

 

As a listed company, one of our primary objectives is to deliver increased shareholder value over time. The Board has adopted a progressive dividend policy and has already paid an interim dividend in the year of 2.2p per share (2017: 2.1p per share). For the year ended 30 September 2018, the Board is proposing a final dividend of 4.4p per share (2017: 4.2p per share), which, if approved at the Annual General Meeting ("AGM"), will take the dividend for the year to 6.6p per share (2017: 6.3p per share), an increase on the previous year of 4.8%. The total dividend for the year of £2.5m (2017: £2.4m) is a dividend cover of 2.9 times the Group's profit after tax, adjusted for exceptional items, which is better than our guidance on dividend cover stated at the time of the IPO. The dividend will be paid on 5 March 2019 to shareholders on the register at close of business on 8 February 2019. The shares will go ex-dividend on 7 February 2019.

Looking forward, whilst continuing to invest in the growth plans of the business, our progressive dividend policy will enable shareholders to benefit as the Group delivers on its performance targets.

 

Board and governance

 

There were no changes to the composition of the Board during the financial year, though since the year end, I am pleased to announce that Ffion Griffith joined the Board as a Non-Executive Director with effect from 1 November 2018.  Ffion is a Fellow of the Chartered Institute of Personnel and Development and has 25 years' experience in senior roles across a range of sectors including technology, professional services and private equity.  She is currently HR Director of Efficio, a Non-Executive Director of Burnt Mill Academies Trust and was previously a Board member at the law firm SJ Berwin LLP. 

The Board now consists of six members, including four Non-Executive Directors and two Executive Directors.  In line with the QCA Corporate Governance Code ("Code"), the Board has reviewed the independence of the Non-Executive Directors and considers all the Non-Executive Directors to be independent.

People

 

A primary driver of the Group's success is the team of highly skilled, driven and loyal employees across the businesses. Last year saw the launch of 'Building Bright Futures', which is a Group wide initiative focused on our culture, our people, our clients and the communities we serve. Nexus places great importance on engaging with and developing its employees and providing a platform for personnel growth and successful career development. On behalf of the Board, I would like to congratulate and thank them for their continued hard work and dedication.

Outlook

Looking ahead, whilst there is continued general uncertainty posed by the forthcoming exit from the EU, the fundamental market growth drivers for our business are positive. Our continuing strong order book, coupled with our strong balance sheet, means our business is well positioned to deliver further growth.

 

Geoff French

Non-Executive Chairman

7 December 2018

 

1.     Group adjusted operating profit excludes exceptional items

 

 

 

EXECUTIVE REVIEW

Group operating results

 

The impact of planning delays affected the Group's businesses to varying degrees, with the overall outcome that the Group's full year revenue of £134.9m was in line with the prior year (2017: £135.0m).  Revenue for Tamdown was £102.5m (2017: £105.6m) and TriConnex revenue increased 9.3% to £32.2m (2017: £29.5m). eSmart Networks was launched in late 2017 and generated revenue in the period of £0.3m.

 

Gross profit for the year increased to £27.6m (2017: £27.2m) with the overall gross margin improving by 31 basis points to 20.5% (2017: 20.2%).

 

Administrative expenses for the Group totalled £18.2m (2017: £19.6m).  The Group adjusted operating profit for the year, which includes the investment in eSmart Networks of £0.7m, totalled £9.4m (2017: £9.3m), an improvement of 1.1%.  The Group adjusted operating profit before the investment in eSmart Networks increased 8.8% to £10.2m (2017: £9.3m) with Tamdown growing operating profit by 11.2% to £8.0m (2017: £7.2m) and TriConnex improving by 7.2% to £3.7m (2017: £3.5m). The Group adjusted operating margin⁽¹⁾ for the year was 7.0% (2017: 6.9%).  The Group adjusted operating margin before the investment in eSmart Networks improved by 63 basis points to 7.5% (2017: 6.9%). 

Profit for the year attributable to equity holders of the parent company was £7.3m (2017: £5.8m).  Basic earnings per share increased 24.2% to 19.1p (2017: 15.4p).

The Group's balance sheet remains strong, with net assets growing by 28.2% to £21.8m (2017: £17.0m). The Group's net cash remains high at £20.0m (2017: £18.7m) with cash and cash equivalents at £26.4m (2017: £27.1m) and bank borrowings of £6.4m (2017: £8.4m). The Group holds a high net cash position in order to support growth and the Group's acquisition strategy.

Demand from customers during the year has been robust and each division has significantly increased their order books: Tamdown's order book is up by 31% to £142.4m, TriConnex's by 55% to £146.5m and eSmart Networks has achieved £0.8m. The Group order book at 30 September 2018 was £289.7m, being a 43% year-on-year increase.

1.     Group adjusted operating profit and operating margin exclude exceptional items

 

Tamdown

 

Financial and operating performance

 

Revenue for Tamdown decreased by 2.9% to £102.5m (2017: £105.6m). The decrease was due to a small number of contracts starting later in the summer than expected, with the associated revenue being deferred to later periods.  The primary reason for the later starts was driven by clients taking longer than expected to resolve planning issues. This related mostly to pre-commencement conditions, which prevented works starting on site until resolved.  The Government has recently updated the National Planning Policy Framework and associated planning legislation, which local authorities are required to adhere to from October 2018. The Board believes that these changes in legislation should ultimately have a positive impact on its business.

Notwithstanding the decrease in revenue for the year, Tamdown's gross profit was in-line with the prior year at £17.2m (2017: £17.3m).  The gross margin for the year at 16.8% (2017: 16.4%) represents an improvement of 40 basis points, driven by continued focus on cost control, resolution of potential claims and process improvements.

Administrative expenses reduced to £9.2m (2017: £10.1m) due to our continued focus on tight cost control.

Operating profit grew by 11.2% to £8.0m (2017: £7.2m) and achieving an operating margin of 7.8% (2017: 6.8%) The margin improvements were achieved through a combination of gross profit improvements and tight cost controls.

The Tamdown order book grew significantly over the year, with the order book at 30 September 2018 up 31% year on year to £142.4m (2017: £108.3m).  This growth was due to a number of factors, including winning work from new clients, an increase in the average contract size won and the deferred commencement of start on works on site on a number of contracts.  This substantial improvement provides confidence for our future growth plans.

Our markets

 

Tamdown clients are UK housebuilders and affordable housing developers, including housing associations. As such, the UK housebuilding market is key to Tamdown.  There is currently general uncertainty posed by the UK's forthcoming exit from the EU, however, the fundamental market growth drivers for our business are positive since the housing market has been in a long-term position of structural undersupply as the number of new houses built has failed to keep pace with the rate of household formation.  The National Housing Federation has identified the need for up to 340,000 new homes in England per year up to 2031, which is ahead of the Government estimate of 300,000 new homes target to tackle the housing shortage.  There is the expectation that the housing deficit will remain over the long term. The prevalence of this deficit has attracted a significant amount of Government stimulus to the sector.

Tamdown operates in the South East of England and London where the undersupply of housing appears to be more acute compared to the rest of the UK.  Within the London market there is a drive to significantly increase the number of affordable homes being constructed, with a shift from homeownership to private renting.  Tamdown works with the majority of the quoted housebuilders, who account for approximately 50% of total private new build volumes with this dominance expected to continue as they work through their land bank and develop larger schemes.  Tamdown also works with a number of Housing Associations that deliver mixed tenure developments and are focused on the affordable homes segment of the housing market.

The Housing white paper released in February 2018 announced new plans by the UK Government to tackle the undersupply of houses by reducing the obstacles to housebuilding and help local authorities, developers and small to medium-sized housebuilders meet housing needs. This is alongside a commitment to build more affordable homes, including Rent to Buy and shared ownership, with an extra £1.4bn for the Affordable Homes Programme, to build around 225,000 affordable homes.

The October 2018 Budget confirmed the extension of Help to Buy until 2023, with a number of changes to price eligibility levels.  The changes are not expected to have an adverse impact on the usage of the scheme and the extension provides certainty to housebuilders. 

Clearly, with Tamdown's established market position as one of the leading providers of infrastructure services to major UK housebuilders, we are well placed, to benefit from the Government's ongoing stimulus.

Growth strategy

Tamdown's ambitions are to grow profits in a sustainable manner through the successful delivery of its strategic goals including:

Multiphase projects: A significant element of Tamdown's work is from larger, multiphase projects, which provide a good level of visibility of future revenues.  These projects are typically large housing developments which are completed in stages.  Once Tamdown has won an initial phase it is typically retained for the remainder of the scheme, the phases of which can extend over many years.  With Tamdown's extensive client base and long-standing reputation for good customer service with the leading housebuilders to housing associations, the Company is well placed to be awarded multi-phase projects.

Client Diversification: The majority of Tamdown's clients are large residential housebuilders.  Tamdown is developing relationships with clients that address the affordable housing market such as Housing Associations that undertake developments themselves and main contractors that build on behalf of Housing Associations.

The skills that Tamdown employs are transferable from the residential sector to other sectors and services.  The infrastructure activities that Tamdown undertakes for the residential sector such as earthwork optimisation, highway works, remediation and drainage solutions, are all services that can also be extended to non-residential clients.

Geographic expansion:  Tamdown has strong relationships with blue chip clients in the South East of England and London.  Tamdown intends to continue to use these relationships to drive customer penetration within the regions that Tamdown currently operates as well as geographically expand through recommendations and referrals from existing clients who also operate in neighbouring regions, as well as developing relationships with new clients.

Outlook

 

Tamdown has an established market position, providing quality services to UK housebuilders and is developing key relationships with the Build to Rent and affordable housing sector developers. The backdrop of Government stimulus to counter the housing supply deficit along with our strong order book, provides us with confidence that our existing and new clients will continue to demand our services and our business is well positioned to grow.

TriConnex

 

Financial and operating performance

 

Revenue for TriConnex increased by 9.3% to £32.2m (2017: £29.5m).  Despite the order book's significant increase during the year from £94.4m to £146.5m, revenue growth was limited as the conversion of orders into revenue took longer than in previous years. TriConnex is engaged at the very early stage of developments with its clients, and often secures contracts prior to land acquisition. 

The increase in the order book illustrates that clients continue to be active, however, as described above, schemes are taking longer to get to start on site, primarily due to the increase in pre-commencement conditions set by the local authorities slowing the preparation of sites prior to construction commencing. As described above, the Government has recently updated the National Planning Policy Framework and associated planning legislation, which local authorities are required to adhere to from October 2018. The Board believes that these changes in legislation should ultimately have a positive impact on its business.

TriConnex is a high gross margin business, principally due to the more technical, office based, added value nature of the services it provides, resulting in a higher proportion of overhead costs. The high gross margin was broadly maintained in the year at 32.4% (2017: 33.8%), with the reduction against the prior year due to initial lower margins in new regions and expansion of the client base.

As TriConnex provides a concept to connection service with a significant amount of desktop planning and research, the majority of TriConnex's staff are office based.  During the year, when it became clear that revenue growth would be impacted by a slower conversion of orders to revenue due to planning issues, the investment in increased levels of staff was tightly managed to ensure resources growth was not greater than revenue growth. Accordingly, the overheads increase in the year has been limited to £0.2m, totalling £6.7m (2017: £6.5m).

Operating profit increased by 7.2% to £3.7m (2017: £3.5m) with an operating margin of 11.6% (2017: 11.8%).

The order book grew by 55% over the year to £146.5m (2017: £94.4m) The growth is due to a number of factors including, continued repeat business from clients that have benefited from TriConnex's focus on customer service, new small and mid-sized housebuilder clients, growth of both the South West and Midlands regions and the greater take up of water and fibre services. The slowdown in order book conversion rates has also contributed to the increased closing order book position.

Our markets

 

The utility connections market consists of three regulated utilities; electricity, gas and water, and one unregulated utility, fibre. Following the opening of the connections market to competition, TriConnex entered the market in 2011 to offer electricity and gas connections, expanding to offer water connections in 2014 and fibre connections in 2016.  Today approximately 60% of gas and approximately 30% of electricity connections in the UK are undertaken by independent connection providers and expectations are that these levels will continue to grow.

TriConnex's core client base consists of a mix of large and mid-sized residential developers, who are offered a full multi-utility service.  Building on its strong position in the gas and electricity connections market, regulatory changes in the last year have supported both its fibre and water proposition.  In fibre, the introduction of Passive Infrastructure Access (PIA) by OFCOM allows independent providers use of the existing duct, chamber and exchange network already in place in the UK.  In water OFWAT have mandated that all water companies publish their charging regime as well as shortening the application process for independent water adopters. Both these changes are expected to create greater levels of competition in the fibre and water connections markets, in which TriConnex is well placed to benefit.

TriConnex continues to differentiate itself in the market through its provision of a full multi-utility connection offer, coupled with a deep focus on outstanding client service.  Historically, utility connections have been a challenge for many developers, however TriConnex's core aim is to apply its client understanding to provide an enhanced experience and deliver connections on time, every time.  With the stated Government aim of delivering 300,000 homes a year by the mid 2020s, TriConnex can play a major role in supporting developers achieve this target.

Growth strategy

TriConnex's growth ambitions are to build the business in a significant and sustainable manner, with the focus of the business continuing to be client service. The growth drivers include:

Geographic expansion:  TriConnex has expanded from its original base in the South East into the South West and the Midlands.  Further geographic expansion is anticipated within the Midlands following the opening of the office in Leicester in October 2018, and then into Northern England.  TriConnex will continue to drive customer penetration in the regions it currently operates in by leveraging existing customer relationships.

Client Diversification: TriConnex's client base is currently residential housebuilders.  The focus had previously been the larger residential housebuilders and TriConnex is now developing relationships with small and mid-sized private development residential housebuilders as well as providers of affordable housing.

Service Innovation:  TriConnex began in 2011 offering the design, installation and connection of gas and electricity networks.  The installation of water networks was introduced in 2014 and fibre in 2016.  Service enhancements currently being introduced include extending the number of fibre network providers housebuilders can connect to and the incorporation of electric vehicle charging units within housing developments.

Outlook

 

The proportion of regulated utility connections to be made by independents is expected to continue to increase. TriConnex has already built a reputation of a high level of client services alongside cost effective, efficient connections.  The fundamental market growth drivers for our business are positive, which, with our continuing strong order book, means that our business is positioned to deliver further growth.

eSmart Networks

 

eSmart Networks provides Electric Vehicle (EV) charging infrastructure, battery storage and specialised distribution network services.  The business was created in 2018 to respond to the UK's need for charging infrastructure as the transition from internal combustion engines to electric vehicles gathers pace.  Existing skills and capabilities within the group allow us to provide turnkey EV charging solutions for clients, with our ability to control the timescale and grid connection process making for an accelerated charging point installation for clients.

Financial and operating performance

 

The establishment of EV charging infrastructure is gathering pace, although is still in its early stages.  Large scale investment is being committed by both the public and private sector and the number of public charging post installations is increasing, although larger scale projects take time to reach the installation stage.  In its first year of trading eSmart Networks generated revenue of £0.3m demonstrating positive progress as the business continues to scale up. 

Our investment in the sector has been measured and initially resulted in installation and connection charges delivering a break-even performance ahead of overhead costs.  However, as the volume and scale of the business has started to grow during 2018, we saw the business deliver profits at the gross profit level.

Administrative expenses totalled £0.7m for the period. As anticipated, the business recorded an operating loss in the year of £0.7m.

The business continues to scale up as is reflected in the order book which grew to £0.8m at 30 September 2018.

Our markets

The UK, through the 2008 Climate Change Act, has a long-term, legally binding commitment to tackling climate change.  As a member of the United Nations Framework Convention on Climate Change (UNFCCC), the UK has also made significant commitments to reduce carbon emissions having agreed to a minimum 40% reduction compared to 1990 levels.  Transport generates approximately a quarter of all the UKs greenhouse gas emissions, therefore, to achieve the legally binding reduction targets for the UK, emissions generated from transport need to be reduced.

In July 2018 the UK Government published the Road to Zero Strategy. This places electric vehicles at the heart of the transition to a lower emission transportation system as well as recognising the need for large-scale infrastructure investment to support this transition (the Government launched a £400m Charging Infrastructure Investment Fund at the same time).      

eSmart Networks has been created by Nexus to support the UK's transition to a lower-carbon transportation system.  A new and valuable market is rapidly emerging, and by applying the electrical expertise within TriConnex, coupled with the civil engineering capability in Tamdown, eSmart Networks is perfectly placed to design and install the electric vehicle charging infrastructure required in the UK.  Whilst only operating for a short period, eSmart Networks has already created a leading reputation for delivering infrastructure solutions across a number of key market segments.

Outlook

The UK's need for EV charging infrastructure is significant and eSmart Networks has been created to respond to this need.  The support from the UK Government, along with consumer demand for charging points to fulfil the needs for the increasing number of electric vehicles, is expected to result in the creation of a valuable growth market that eSmart Networks is well placed to address.

The Board believes that significant transformation will need to take place within the UK's charging infrastructure and electrified transport system. 

The tipping-point for mass acceleration of this transformation will be driven by a combination of factors including the availability and affordability of EVs, Government investment commitments, private funding availability, and grid network capacity availability.  With eSmart Networks' developing its ability to deliver both complex and simple schemes for clients, the business is well placed when the market acceleration arrives.

Other financial information

 

Exceptional items

 

There are no exceptional items recorded this year.  In 2017, the Group incurred exceptional costs in relation to the IPO totalling £1.7m and comprised £0.6m in relation to transaction costs and £1.1m in relation to settling share-based management incentive arrangements (non-cash) that were triggered on completion of the IPO.

Net finance costs

 

The net finance charge for the year totalled £0.22m (2017: £0.23m). Interest received on bank deposits totalled £0.03m (2017: £0.07m), with interest payable on bank borrowings of £0.21m (2017: £0.26m) and interest on finance lease and hire purchase facilities totalling £0.04m (2017: £0.04m).

Tax

 

The tax charge for the year was £1.9m (2017: £1.6m), representing an effective tax rate of 20.8% (2017: 21.0%).

Earnings per share

 

Basic earnings per share were 19.1p (2017: 15.4p). The diluted earnings per share were 18.9p (2017: 15.0p). 

Dividends

 

As noted in the Chairman's statement, the Board has recommended a final dividend of 4.4p (2017: 4.2p) per share, giving a total dividend for the year of 6.6p (2017: 6.3p) per share, an increase of 4.8%.  The total dividend results in the dividend cover of 2.9 times, which is ahead of the Group's guidance on dividend cover of 3.0 times.  The total cost of the dividend, including the interim dividend, will be £2.5m.

Statement of financial position

 

During the year to 30 September 2018, shareholders' funds increased by £4.8m to £21.8m (2017: £17.0m), the movement included the payment of dividends totalling £2.4m, which was mitigated by the trading performance of the Group companies.

Non-current assets decreased over the year by £0.9m to £9.3m (2017: £10.2m), with the decrease including the disposal of plant and equipment.  Current assets increased by £6.3m to £72.2m (2017: £65.8m) with inventories increasing by £2.4m, trade and other receivables increasing by £4.6m and cash balances decreasing by £0.7m to £26.4m.

Total liabilities increased by £0.6m to £59.6m (2017: £59.0m), with borrowings decreasing by £2.0m with the repayment of the term loan.

Cash flow

 

The Group utilised £0.7m (2017: utilised £6.9m) of cash in the year, resulting in a cash and cash equivalent balance at 30 September 2018 of £26.4m (2017: £27.1m).

Operating cash flows before working capital movements, generated £10.6m (2017: £10.3m). Investment in working capital totalled £4.1m (2017: £5.0m), with the main increase in debtors, resulting in cash generated from operating activities of £6.5m (2017: £5.3m). Tax and interest payments amounted to £1.8m (2017: £2.7m). Cash utilised in investing activities totalled £0.2m (2017: £3.4m), with £0.8m used to acquire fixed assets. Net cash out-flows from financing activities totalled £5.1m (2017: £6.2m), including £2.4m (2017: £3.5m) on dividend payments.

Treasury risk management

 

The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved consistent with retaining liquidity for the Group's operations. The Group deposits funds only with financial institutions which have a minimum credit rating of A. As the Group operates wholly within the UK, there is no requirement for currency risk management.

 

Mike Morris                                       Alan Martin

Chief Executive Officer                 Chief Financial Officer

7 December 2018

 

 

 

Consolidated statement of total comprehensive income

For the year ended 30 September 2018

 

	Note	2018	2017
		£'000	£'000
Revenue		134,938	135,034
Cost of sales		(107,296)	(107,793)
Gross profit		27,642	27,241
Administrative expenses		(18,210)	(19,624)
Operating profit before exceptional items		9,432	9,331
Exceptional items	3	-	(1,714)
Operating profit		9,432	7,617
Finance income	4	29	70
Finance expense	4	(249)	(304)
Profit before tax		9,212	7,383
Taxation	5	(1,918)	(1,554)
Total comprehensive income for the year attributable to equity holders of the parent		7,294	5,829
Earnings per share (pence per share)
Basic	7	19.14	15.40
Diluted	7	18.85	15.01
Consolidated statement of financial position At 30 September 2018     2018 2017   £'000 £'000       Non-current assets     Property, plant and equipment 6,853 7,795 Goodwill 2,361 2,361 Other investments 47 55 Deferred tax asset 7 - Total non-current assets 9,268 10,211       Current assets     Inventories 3,317 924 Trade and other receivables 42,426 37,841 Cash and cash equivalents 26,414 27,066 Total current assets 72,157 65,831 Total assets 81,425 76,042       Current liabilities     Borrowings 2,000 2,000 Trade and other payables 52,597 49,909 Corporation tax 461 39 Total current liabilities 55,058 51,948       Non-current liabilities     Borrowings 4,400 6,400 Net obligations under finance leases/hire purchase agreements 156 619 Deferred tax liabilities - 62 Total non-current liabilities 4,556 7,081 Total liabilities 59,614 59,029       Net assets 21,811 17,013       Equity attributable to equity holders of the company     Share capital 762 762 Retained earnings 21,049 16,251       Total equity 21,811 17,013