TIDMMOGP
RNS Number : 1743C
Mountfield Group plc
14 June 2019
14 June 2019
Mountfield Group Plc ("Group")
and its subsidiary Connaught Access Flooring Limited ("CAF") and
Mountfield Building Group Limited ("MBG")
Final Results for the Year Ended 31 December 2018
The Directors of Mountfield Group Plc are pleased to announce
its Final Results for the year ended 31 December 2018 ("Final
Results").
The Group also announces that its Annual General Meeting will be
held at 10 a.m. on 9 July 2019 at the offices of DAC Beachcroft LLP
at 25 Walbrook, London EC4N 8AF.
The Annual Report and Accounts for the year ended 31 December
2018, together with the Notice of Annual General Meeting will
shortly be posted to shareholders and uploaded to the Group's
website on: www.mountfieldgroupplc.com .
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information, please contact:
Mountfield Group plc 01268 561 516
Peter Jay, Chairman
Andy Collins, Chief Executive
Officer
Cairn Financial Advisers LLP 020 7213 0880
Jo Turner / Tony Rawlinson
CHAIRMAN'S REPORT
The Board of Mountfield Group Plc ("the Group") is able to
report another extremely successful year with Net Profit Before Tax
having increased by 28%. Both of the Group subsidiaries, Mountfield
Building Group Limited ("MBG") and Connaught Access Flooring
Limited ("CAF"), have traded successfully and provided the Group
with an increasing volume of business and an active and growing
order book.
The Board is of the view that the Group's is very well placed to
capture significant new quantities of business that is expected to
flow from the data centre and telecoms sectors as a result of the
introduction of 5G networking technology beginning in 2020.
5G, described as a "transformative technology", has been
forecast to have as fundamental an impact on the telecoms sector as
the development of mobile phone technology (1G) had in the 1980s.
The Directors believe that the requirement for its customers to
upgrade and replace new telecom infrastructure will continue to
create significant additional demand for the Group's services over
the next decade.
The Group's financial performance does not yet reflect any
material amount of income that is referable to the introduction of
the new technology. The Directors believe that demand for the
services of MBG and CAF could increase substantially over the next
few years as a result of both the development and continued growth
of its existing operations and from the introduction of new
technologies driving its clients to upgrade existing
infrastructure.
Key Features
-- Annual PBT increases by 28% to GBP1,109,332 (2017: GBP864,372) and has risen by 250% over the last three years.
-- Group's secured order book currently stands at GBP16.4m
-- Turnover: GBP16.2m (2017: GBP12.7m) and has increased by 168% over the last three financial years.
-- Operating profit: GBP1,129,173 (2017: GBP902,282)
-- Earnings per share: 0.268p (2017: 0.254p)
-- Net cash position: GBP677,747 (2017: GBP520,301)
-- Gross Margin: 15.5% (2017: 17.5%)
-- Operating Margin: 7.0% (2017: 7.1%)
-- The Board expects the Group to produce another strong performance in 2019.
Financial Performance
The Directors are delighted to announce that over the last three
financial years Net Profit Before Tax has increased by 250%.
Even though gross margin has been reduced during the year (as a
result of the lower margins on some of the larger contracts)
operating profits have increased significantly because the Group's
overhead base has not increased during a year when turnover
increased substantially.
About the Group
The Group was formed in October 2008 by its acquisition of the
shares of MBG and CAF. This was followed by the admission of its
shares onto AIM in the same month.
The two subsidiaries each supply specialist construction
services to areas of the telecom and data centre sectors. CAF, a
top tier commercial flooring supplier and installer (and one of the
few that are able to tender for the largest contracts) has
considerable expertise and experience in the installation of the
raised access flooring systems that are employed in data centres
and also in the dealing floors of banks and other financial
institutions. It also contracts to supply and install other
commercial flooring systems.
In recent years CAF has successfully supplied and installed
flooring for three major banking and finance clients in contracts
that have been part of some of the largest awarded for developments
in Central London. Interspersed with these have been contracts for
flooring systems in data centres in the UK and Mainland Europe.
MBG has, since the early days of mobile technology concentrated
on providing the services that were required by developers of data
centres and telecoms infrastructure.
A substantial proportion of MBG's turnover is now tied up
providing construction services for the development or enlargement
of data centres and structures connected with them. In addition,
one of its largest clients, a World leading telecom company,
regularly retains it to undertake construction work on its
substantial property estate.
The Companies
Connaught
CAF's turnover in the year to 31 December 2018 was GBP8.2m (2017
- GBP8.4m) and its profit before tax GBP313,512 (2017 -
GBP568,651). Although activity levels remained high there was a
reduction in both turnover and net profit due to pauses between the
end of one substantial contract and the beginning of new ones. The
Company has been concentrating (with considerable success) on
building up its order book of smaller contracts (those with a value
of GBP100k or less) to provide a continuing revenue stream during
periods when it is not fully engaged on large contracts.
The largest contract undertaken during the year was that to
supply and install flooring over 70,000 sq metres for the new
headquarters building of a leading investment bank. The contract
(which is in its last stages) is likely to have a value in excess
of GBP7m over three financial years.
Mountfield Building Group
MBG's turnover in the year to 31 December 2018 was GBP8.0m (2017
- GBP4.3m) and its profit before tax was GBP780,502 (2017 -
GBP283,015) after excluding the waiver of a debt from its
subsidiary. This was an extremely good year for the Company as its
strategy of focussing on the demands of its data centre and telecom
customers proved timely as they increased their levels of activity
and their demand for its services.
The year saw a substantial number of new contracts won in direct
negotiation and by tender, including a number of new security
upgrades for its largest telecoms client; these are part of a
continuing, multi-year upgrading programme.
Outlook for the Group
CAF and MBG both operate in markets where demand for specialist
construction services for the telecoms sector is strong and is
likely to increase. With the benefit of their low-cost operations,
excellent client bases and reputations for completing contracts on
time and to an extremely high standard, they have the potential to
capture a greater share of work from existing or new clients.
The outlook for CAF, with its leading position in the commercial
flooring market based on the demand for high quality, large
commercial flooring contracts continues to be highly favourable. In
addition to the continued demand for large floor-plate trading and
office areas there is the return of demand, both in the UK and in
Europe for extra data centre capacity and as a result the Board
believes that the outlook for CAF remains increasingly bright.
The Board takes a similar view of MBG's prospects. With its
extensive contacts within the telecoms field and its
long-established connection with a leading telecoms operators and
data centre developers it is well positioned to benefit from the 5G
revolution and from the expected growth in demand for telecoms
infrastructure.
The 5G revolution is expected to result in numerous additional
appliances and devices (including autonomous cars and robotics and
whole cities) being networked and thus increasing the need for data
capacity and this, in turn will drive the need for new data centres
and the expansion of existing units.
The Directors believe that the impact of the introduction of 5G
networks for companies such as MBG and CAF which already have deep
roots in the telecoms sector in terms of skill, expertise,
recognition and client base could be profound. The impact for the
sector could equal that which it experienced when the first wave of
data centres was commissioned at the end of the last century.
Peter Jay
Non-Executive Chairman
CEO's REPORT
The Group Board currently comprises:
Peter Jay - Non-Executive Chairman - in addition to being Group
Chairman Peter also manages the Group's relationships with its
nomad, brokers and professional advisers. Peter was formerly a
corporate lawyer and a partner in DAC Beachcroft LLP.
Andrew Collins - Group Chief Executive - Andy is responsible for
managing the business of the Group and also that of its subsidiary,
CAF, a specialist supplier and installer of flooring for commercial
properties whose business and reputation he has developed
significantly since appointment in 2004. Before joining the Group,
Andy was a Divisional Financial Director at ISG Plc.
Graham Read - Managing Director of MBG - Graham founded the
business of MBG in 1986 and has had over 40 years' experience in
the construction industry.
The Board is supported by Andy May, a partner in the firm of
Barnes Roffe LLP. Andy attends meetings of the Group's Board in an
advisory-only capacity and also assists the Board in overseeing the
Group's accounting and finance functions.
The Board is also supported by Chris Adlam, a director of JDC
Corporate Finance. Chris attends meetings of the Group's Board in
an advisory-only capacity to provide advice on business finance and
aspects of corporate finance.
Group Companies
The Group is comprised of two principal trading companies,
Connaught Access Flooring Limited ("CAF") and Mountfield Building
Group Limited ("MBG").
CAF is one of the leading suppliers and installers of raised
access flooring systems to main contractors and corporate end users
for office and data centre installations.
It has established itself as one of the few recognised
specialists for the flooring elements of fitting out contracts in
new and refurbished commercial office space and for the Data Centre
market. These projects are undertaken both direct with the end user
and for leading Construction companies.
The current demand for construction of high quality, high tech
banking and office HQ buildings plays to CAF's strengths as it
enables the Company to present its professionalism and credentials
and compete on quality of service, expertise and experience, rather
than simply on price.
MBG comprises the construction division of the Group and in
addition to its extensive experience of undertaking work for the
data centre sector MBG also undertakes specialist construction work
for end user clients.
2018 saw MBG continue to develop its long term relationship
undertaking building fabric repair and maintenance works on a
nationwide basis for a large proportion of the property portfolio
of a leading telecoms operator.
Finance
The Group is financed from the cash it generates from its
operations, with the support of a bank overdraft facility of
GBP250,000 and a term loan of GBP71,558, the group also had a
supplier financing arrangement however this has lapsed as it is no
longer required.
The construction market
The Group continues to experience extremely strong levels of
activity in terms of enquiries and tenders and the Board is
confident as to the strength and sustainability of the current
strong demand for services provided by the Group.
Group's strategy
The Board strategy is for the Group to become a highly
profitable, mid-sized operation that provides specialist
construction and flooring services in a number of diverse but
related areas but with a particular focus on the fit-out sector.
The Group's reputation has been built on its ability to undertake
and to manage specialist construction services to a high level of
quality and to deliver the completed project to the client on time.
This will remain at the core of its strategy.
Principal risks
The principal risks and uncertainties facing the Group relate
to:
Attraction and retention of key employees
The Group's future success is substantially dependent on the
continued services and performance of its directors, senior
management and other key personnel and its ability to continue to
attract and retain highly skilled and qualified personnel.
The senior executive directors of the business all have
significant shareholdings in the parent company and are all
permanent employees.
Economic downturn and other macroeconomic factors
The Group's success is substantially dependent on the general
level of economic activity and economic conditions in the United
Kingdom.
Many of the Group's contracts, including renewals or extensions
of previous contracts, are awarded through competitive bidding
processes. Any downturn in the economy, or any other macroeconomic
factor, either in the UK or globally, may reduce the number of
contracts coming up for bidding.
The competitive bidding processes present a number of additional
risks, including the incurrence of substantial cost and managerial
time to prepare bids and proposals for contracts that the Group may
not ultimately win. The Group may face additional competition in
the bidding process either from existing competitors or new market
entrants.
The Company is seeking to mitigate its exposure to the sectors
in which it currently operates by diversifying its client base and
in particular expanding into closely aligned areas of activity.
Reliance on key customers and clients
The business of the Group is dependent upon the continuing
contracts that it has, and relationships that it has developed,
with certain customers.
Whilst signed contracts are in place with key customers, the
successful completion and timing of contracted projects are not
guaranteed and are susceptible to external factors outside of the
control of the Group. Similarly, contracted projects may in some
circumstances be susceptible to delays or variation by customers or
be affected by unforeseen changes in circumstances relating to the
market, technology, legislation, economic or other business
factors. This may affect the cash flow and subsequent performance
of the Group.
The Group works with a well-established client base and the
performance of individual projects is monitored on at least a
monthly basis by board members to identify any issues with specific
projects.
Reliance on Subcontractors
The Group utilises subcontractors on a project-by-project basis
to meet contractual obligations. Such projects will rely on the
subcontractors performing their duties and obligations, not only in
terms of timely delivery but also in terms of their performance
obligations. Any such non-performance may result in time and cost
over-runs on the Group's projects and reduce the value of its
returns.
Subcontractors are vetted by senior management and normally
engaged to work on closely defined and managed aspects of
contracts. Most subcontractors have a long standing trading history
with the Group.
Health and safety
The Group undertakes Construction activities, often working
within difficult conditions and with heavy machinery which if
improperly used could result in personal injury or in extreme
cases, fatalities.
The Group takes the health and safety of its employees and
clients very seriously and employs Health and Safety advisors on
all significant contracts. It also has a firm of Health and Safety
Advisors with whom it consults on a regular basis.
Key performance indicators
The Directors use a number of performance indicators which are
used to manage the business but, as with most businesses the focus
in the Statement of Comprehensive Income at the top level is on
sales, margins, and profit before tax. In the Statement of
Financial Position the focus is on managing working capital. The
key performance indicators are disclosed in the Strategic
Report.
Financial instruments
Details of the Group's financial risk management objectives and
policies are included in note 19 to the financial statements.
Andrew Collins
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
2018 2017
GBP GBP
Revenue 16,220,768 12,692,126
Cost of sales (13,713,296) (10,467,673)
------------- --------------
Gross profit 2,507,472 2,224,453
Administrative expenses 5 (1,378,299) (1,322,171)
------------- --------------
Operating profit 1,129,173 902,282
Net finance costs 5 (19,841) (37,910)
------------- --------------
Profit before income tax 1,109,332 864,372
Income tax expense 6 (426,758) (218,999)
Profit for the year and total
comprehensive income 682,574 645,373
Earnings per share 7
Basic earnings per share 0.268p 0.254p
Diluted earnings per share 0.268p 0.254p
======= =======
There are no recognised gains and losses other than those
passing through the Statement of Comprehensive Income.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
2018 2017
GBP GBP
ASSETS
Non-current assets
Intangible assets 6,874,308 6,874,308
Property, plant and equipment 102,655 80,434
Deferred income tax assets - 199,330
------------ ------------
6,976,963 7,154,072
------------ ------------
Current assets
Inventories 115,302 88,301
Trade and other receivables 2,411,068 3,651,516
Cash and cash equivalents 1,236,162 520,301
------------ ------------
3,762,532 4,260,118
------------ ------------
TOTAL ASSETS 10,739,495 11,414,190
============ ============
EQUITY AND LIABILITIES
Issued share capital 2,524,426 2,524,426
Share premium 1,490,682 1,490,682
Share based payments reserve - -
Capital redemption reserve 7,500 7,500
Merger reserve 4,051,967 4,051,967
Reverse acquisition reserve (2,856,756) (2,856,756)
Retained earnings 817,632 135,058
------------ ------------
TOTAL EQUITY 6,035,451 5,352,877
------------ ------------
Current liabilities
Trade and other payables 3,305,728 4,712,512
Short-term borrowings 1,107,528 958,020
Corporation tax liability 229,782 124,050
4,643,038 5,794,582
Non-current liabilities
Loan notes 61,006 200,000
Bank loan - 66,731
4,704,044 6,061,313
------------ ------------
TOTAL EQUITY AND LIABILITIES 10,739,495 11,414,190
============ ============
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2018
2018 2017
GBP GBP
Cash flows from operating activities
Operating profit 1,129,173 902,282
Adjusted for:
Depreciation 12,556 11,595
Profit on Disposal (4,400) (1,294)
(Increase) in inventories (27,001) (29)
Decrease/(increase) trade and
other receivables 1,240,449 (1,874,903)
Increase/(Decrease) in trade and
other payables (1,374,996) 1,508,009
------------ --------------
Cash generated in operations 975,781 545,660
Finance costs (19,841) (37,910)
Taxation paid (121,696) (56,782)
------------ --------------
Net cash inflow from operating
activities 834,244 450,968
------------ --------------
Cash flows from investing activities
Purchases of property, plant and
equipment (34,777) (3,782)
Proceeds from sale of property,
plant and equipment 4,400 4,003
------------ --------------
Net cash (used in)/generated from
investing activities (30,377) 221
------------ --------------
Cash flows from financing activities
Finance lease rentals - (583)
Repayment of non-convertible loan
notes (138,994) (190,901)
Movement on supplier invoicing
facility (387,795) 387,795
Repayment of short-term loans (119,632) (106,952)
Net cash flows (used in)/generated
from financing activities (646,421) 89,359
------------ --------------
Net cash increase in cash and
cash equivalents 157,446 540,548
Cash and cash equivalents brought
forward 520,301 (20,247)
------------ --------------
Cash and cash equivalents carried
forward 677,747 520,301
============ ==============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Share
based Capital Reverse
Share Share payment redemption Merger acquisition Retained
capital premium reserve reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP GBP GBP
At 1 January
2017 2,524,426 1,490,682 68,871 7,500 4,051,967 (2,856,756) (579,186) 4,707,504
Total
comprehensive
income for
the year - - - - - - 645,373 645,373
Conversion of
loan notes - - (68,871) - - - 68,871 -
At 31 December
2017 2,524,426 1,490,682 - 7,500 4,051,967 (2,856,756) 135,058 5,352,877
========== ========== ========= =========== ========== ============ ========== ==========
Total
comprehensive
income for
the year - - - - - - 682,574 682,574
At 31 December
2018 2,524,426 1,490,682 - 7,500 4,051,967 (2,856,756) 817,632 6,035,451
========== ========== ========= =========== ========== ============ ========== ==========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2018
1 General information
Mountfield Group plc is a public company incorporated in England
and Wales. The registered number of the Company is 06374598. The
address of its registered office is 3C Sopwith Crescent, Wickford
Business Park, Wickford, Essex SS11 8YU.
Above is an extract from the Final Results for the year ended 31
December 2018. The Final Results, which will shortly be posted to
all shareholders and available on the Group's website, should be
read in full.
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs), IFRIC Interpretations and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The adoption of these standards has not resulted in any changes
to the Group's accounting policies and has not affected amounts
reported in prior years. The financial statements have been
prepared under the historical cost basis.
2 Changes in accounting policies
IFRS 15 'Revenue from Contracts with Customers'
The Group has applied this accounting standard from 1 January
2018 and has adopted the modified retrospective approach to its
adoption which would result in any adjustments for contracts in
progress at 1 January 2018 being made to opening retained earnings
at that date.
The Group has considered how contracts are accounted for in
accordance with IFRS 15 using the 5-step approach set out in that
standard. In undertaking this exercise the Group has not identified
any material changes in how revenue would be recognised for the
contracts in progress at 31 December 2017 nor with those that have
been undertaken in the 12 months to 31 December 2018.
The Group expects that the adoption of this standard could have
an impact if loss making contracts occur but other than those does
not currently foresee any material changes from the previous
accounting policy.
IFRS 16 'Leases'
The Group is working with its advisors to assess the potential
impact of IFRS 16 'Leases', including consideration of transition
method. The standard is expected to only affect the Group in
respect of leases that it has in place that are currently treated
as operating leases in accordance with current standards.
The Group only acts as a lessee and will be required to
recognise operating leases on the balance sheet when the new
standard is implemented. The group will adopt the modified
retrospective approach will be adopted meaning the Group will only
recognise such leases on the balance sheet as at 1 January 2019. It
is anticipated the Group will recognise right-of-use assets in
respect of the properties it leases with a value of approximately
GBP49k being attributed to right-of-use assets and a lease
liability of the same amount.
IFRS 9 'Financial Instruments'
From 1 January 2018, the group is required to recognise a loss
allowance for expected credit losses on these financial assets. The
new standard states that if the credit risk on a financial
instrument has significantly increased since initial recognition,
the loss allowance must be measured using the lifetime expected
credit loss. Given the majority of the Groups invoicing is to large
companies with an assessed low credit risk we do not deem the
impact on the Group's financial statements to be material.
3 Earnings per share
The basic earnings per share is calculated by dividing the
earnings attributable to equity shareholders by the weighted
average number of shares in issue. The diluted earnings per share
is calculated by dividing the earnings attributable to equity
shareholders by the weighted average number of shares in issue plus
the number of warrants and share options. The share options are not
considered dilutive as the shares would be issued for greater than
the average market price of the ordinary shares in 2018 and
2017.
2018 2017
Basic earnings per share GBP GBP
Profit for the financial
year 682,574 645,373
Weighted average number of
shares 254,244,454 254,244,454
============ ============
2018 2017
Diluted earnings per share GBP GBP
Profit for the financial
year 682,574 645,373
Number of shares 254,244,454 254,244,454
============ ============
4 Availability of Report and Accounts and Notice of Annual General Meeting
The Group will shortly post the Annual Report and Accounts for
the year ended 31 December 2018 and Notice of Annual General
Meeting to shareholders.
The Annual General Meeting will be held at the offices of DAC
Beachcroft LLP, 25 Walbrook, London EC4N 8AF on 9 July 2019 at 10
a.m. A copy of the Annual Report and Accounts for the year ended 31
December 2018 and Notice of Annual General Meeting will be
available to be downloaded from the Group's website at
www.mountfieldgroupplc.com.
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