Up 19p and 12.5% on one reported sell of 500 quid.

These were up nicely yesterday aswell.

Anyone know if something is happening in the background????????????.

I own these shares.

cheers GF.

https://www.constructionnews.co.uk/analysis/interviews/hitting-5-margin-how-north-midlands-john-homer-aims-to-do-it/10022178.article?blocktitle=&contentID=

The £250m-turnover firm’s CEO has shaken up a loss-making division since joining the group a year ago. Now he reveals how ambitious five-year targets will be met.

MORE FROM: NORTH MIDLAND CHIEF: WE’LL MAKE 5% MARGIN IN FIVE YEARS
“I was the school times-tables champion,” says John Homer as he takes me through the North Midland Construction’s balance sheet. “I’m a maths nerd.”

And it’s a good job he is. Since joining the group as chief executive in June last year, Mr Homer has been tasked with one particularly challenging number-crunching exercise.

Despite a 15 per cent rise in group turnover alongside overall operating profit of £2.2m in 2016, the firm’s utilities arm haemorrhaged £2.6m last year – having made a £2.1m operating loss the year before.

However, following major upheaval to address the bottom line, Mr Homer is now leading the Nottinghamshire-based group towards achieving its ambitious target of a 5 per cent operating margin within five years.

Sitting down with Construction News over coffee, he explains how investing in technology, innovation and – most importantly – people is central to the group’s plans to accelerate its business.

Utilities turnaround

North Midland Construction is arguably a very different company from those Mr Homer had been used to.

Having previously held positions at Bam Construction, Galliford Try and most recently Morgan Sindall, he has worked for major contractors for more than 30 years. However, in May 2016, he decided to buck this trend and join the much smaller North Midland Construction as chief executive.

One of the first tasks Mr Homer faced was to drag the group’s underperforming utilities division out of the red. This business – a longstanding part of the business that works mainly in the telecommunications sector – made a £4.7m operating loss in 2015 and 2016 combined.

“Turning numbers like that around is not easy. But there is a massive demand for [utilities] because the country is behind the game in terms of internet connectivity”

John Homer, North Midland Construction
According to Mr Homer, the group even considered scrapping the utilities division altogether. “The board was very concerned,” he explains. “They asked, ‘Is this the right thing to be doing? Shall we stop?’”

Mr Homer believed, however, that underlying demand in the sector was strong enough to maintain the utilities business, suggesting its problems were not fundamental – it just needed to a renewed focus. “Turning numbers like that around is not easy. But there is a massive demand for this business because the country is behind the game in terms of internet connectivity.”

The division was put under Mr Homer’s direct leadership and has undergone dramatic changes over the last 12 months. He oversaw an extensive management restructure and set up three units within the division, with each unit run under a leader. According to Mr Homer, this has helped to focus the business.

Beyond the numbers

The division has changed significantly since the shake-up, with around 40 per cent of its current headcount having been hired within the last 12 months. “The group has grown and people have naturally decided to leave through the restructure,” Mr Homer explains. “Some people have retired or decided to leave so we needed to inject new people into the division.”

North Midland Construction Group 3

The firm has seen significant change in personnel over the past 12 months
In his previous role as managing director for the South of England at Morgan Sindall, Mr Homer was part of a 6,000-strong company. North Midland Construction employs just a third as many staff.

Its smaller size, however, was a central reason why he was drawn to the job in the first place. “I enjoyed my time at those companies and my career progressed there. But going to an organisation that is a little bit smaller but has enough substance to be able to make an impact was what attracted me to it.”

“Going to an organisation that is a little bit smaller but has enough substance to be able to make an impact was what attracted me to [North Midland]”


The culture of the business was particularly appealing, he adds. “The people here really attracted me into the business. I spent a lot of time working out what the culture of the group was, what I could add to it and where we as a company were going to go.”

Employing the right people not only for the job but for this culture is critical, he continues, with encouraging diversity one way to achieve this. “We want to be diverse and we want the right people. Diversity is about getting more women, people from ethnic backgrounds, people who are resettling from [other] careers, the armed forces, military and ex-offenders into the industry.”

Aiming for 5 per cent

Despite the difficulties experienced in utilities, the group has set itself an ambitious five-year business plan.

It aims to reach a 3 per cent operating margin across the group by 2019 and a 5 per cent margin by 2021, with the figure having stood at 0.9 per cent in 2016. Mr Homer also expects the group’s turnover to double to £500m within five years, from just over £250m in 2016.

North Midland Construction Group 4

Turning around the utilities division is among the group’s priorities
The margin goals are significant. After all, the industry average for the top 100 contractors has remained stubbornly below 3 per cent for some time. Mr Homer emphasises that innovation will be vital to achieve this. “We’re going to be investing in technology, which will give us massive efficiency. We’re going to look at different methods of working, progressing in BIM, and our offsite manufacturing facilities will yield better margins.”

The group has three factory facilities where it is doing its own offsite manufacturing. Although this requires a capital investment commitment, Mr Homer says pumping money into technology will lead to more efficient delivery. “Contractors run businesses on very narrow margins and managing risk carefully. A contractor’s mentality, therefore, is about margins in the short term rather than investing for the longer term.”

“Without a doubt, the way the industry approaches technology and innovation is sluggish”


Mr Homer believes this industry-wide focus on getting the best out of slim margins means that committing capital to technology can often take a back seat. “Without a doubt, the way the industry approaches technology and innovation is sluggish,” he says.

“Construction companies don’t do anywhere near enough in applying themselves to be more efficient. But we have to think how we help ourselves by thinking differently. We need to be looking at businesses in the long term and making longer-term business plans – and investing in technology, modern methods of working and [our] people.”

The industry needs to take responsibility for its development instead of looking to government to step in to catalyse change, Mr Homer argues, citing the BIM mandate as an example of where construction lags behind other industries. “You’ll never find another industry or modern disruptive company, such as Uber, where they’ll wait for a customer to mandate a different approach. But the construction industry feels it needs a directive from its customer base to [improve].”

Instead, Mr Homer says the mindset should be the opposite: companies should want to use these technologies for more efficient delivery of projects for customers.

While innovation is high on the agenda, his biggest priority is for North Midland Construction to keep doing what it does best. “We want to be renowned for our delivery, customer service, innovation, and for being a great place to work.

“If we achieve that, then we’ll be happy.”

Today's results statement ends with:

... the results for the year to 31 December 2017 are expected to be ahead of management expectations. The Board has the confidence, therefore, to propose a doubling of the interim dividend to 3.0p per share (H1 FY16: 1.5p per share). The dividend will be paid on 15 September 2017 to shareholders on the register at 18 August 2017....

Better put in a 15 year chart so I can see where the all time high is ;-)

North Midland Construction said annual profits halved after a stronger underlying performance was blighted by a troublesome legacy contract.

Pre-tax profit slipped to £1.0m, despite revenue rising 17% to £291.8m.

Underlying pre-tax profit, however, increased by 40% to £8.3m and the company declared a full-year dividend of 6.0p, up 33% from 4.5p in 2016.

'It is disappointing that focus on a healthy underlying group performance from our continuing operations appears to continue to be diverted by the outcome on the remaining legacy contract,' chief executive John Homer said.

'We are pleased by the underlying position and in particular the success achieved on driving our cash balance and the quality of the forward order book.'

'There are positive signs of continued growth in our chosen market sectors.


My view:
I look at it this way.

If the underlying profit is £8.3m (and the legacy contract is cash neutral on which you can form your own opinion) it doesn't matter that the balance sheet isn't perfect, because at that level of profit and cash generation it will be in a year or so.

£8.3m underlying profit compared with a market cap of £30m is fairly unusual. Further assets less liabilities is a positive £12.8m which reflects their ownership of premises and plant and machinery.



When I've feeling overenthusiastic I look at it this way.

Next year we could make £10m underlying with some ease since the order book is secure and margins are rising. That give EPS of 100p and a P/E of 3 with no pension fund deficit, net cash and the finance debt of £5m supported by fixed assets of £17m and cash at the bank of £17m as well.

Dividend yield is poor though at 2% and reflects managements desire to further improve the balance sheet which is no bad thing given their rate of growth.

At the Annual General Meeting to be held today at noon, the Group's Chairman, Robert Moyle, on behalf of the Board will make a statement to shareholders, including the following on current trading:

"We are pleased to be able to report further progress in the first quarter of this year over the comparable period last year. Group revenue increased by 19.8% to £74.55 million and profitability by 11.0% to £0.64 million. The net margin declined to 0.86%, which the Board continues to consider to be an unsatisfactory return.

Share price getting there after it got a bit over-enthusiastic too quick.
Everything going well. I am holding with 100% conviction and complete confidence in this trade