North Midland Construction revenue growth accelerated from 8.8% in 2014 to 12.7% in 2015

01 Apr 2016 • About North Midland Construction ($NMD) • By InTwits

North Midland Construction reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is quite volatile: 1.2% in 2015, -0.6% in 2014, -2.3% in 2013, 1.4% in 2012, 0.4% in 2011
North Midland Construction has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.5%.
The company has potentially unprofitable business model: ROIC is at 5.5%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

North Midland Construction ($NMD) key annual financial indicators

mln. £	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	167.2	168.9	177.6	193.2	217.6	12.7%
Gross Profit	40.5		41.9	51.6	60.1	16.5%
EBITDA	0.7	2.4	-4.1	-1.2	2.7	-331.6%
Net Income	-0.8	0.5	-5.9	-3.0	1.3	-141.8%
Balance Sheet
Cash	9.2	5.1	4.9	5.3	6.6	25.5%
Short Term Debt	0.8	0.9	0.8	1.5	2.0	27.2%
Long Term Debt	0.9	0.9	0.7	2.1	2.3	10.2%
Cash flow
Capex	1.0	0.6	1.5	0.8	1.0	35.5%
Ratios
Revenue growth	1.6%	1.0%	5.1%	8.8%	12.7%
EBITDA growth	-86.6%	233.6%	-272.5%	-72.1%	-331.6%
Gross Margin	24.2%		23.6%	26.7%	27.6%	0.9%
EBITDA Margin	0.4%	1.4%	-2.3%	-0.6%	1.2%	1.8%
Net Income Margin	-0.5%	0.3%	-3.3%	-1.5%	0.6%	2.1%
CAPEX, % of revenue	0.6%	0.4%	0.8%	0.4%	0.5%	0.1%
ROIC	-4.4%	3.8%	-35.2%	-22.1%	5.5%	27.5%
ROE	-4.0%	2.6%	-39.1%	-28.6%	13.0%	41.6%
Net Debt/EBITDA	-10.4x	-1.4x			-0.9x	-0.9x

Revenue and profitability

The company's Revenue surged on 12.7% in 2015. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.8 pp from -0.60% to 1.2% in 2015.

Gross Margin increased slightly on 0.91 pp from 26.7% to 27.6% in 2015.

Net Income marign increased on 2.1 pp from -1.5% to 0.57% in 2015.

Capital expenditures (CAPEX) and working capital investments

North Midland Construction's CAPEX/Revenue was 0.48% in 2015. CAPEX/Revenue showed almost no change from 2012 to 2015. For the last three years the average CAPEX/Revenue was 0.57%.

Return on investment

The company operates at good ROE (13.04%) while ROIC is low (5.46%). ROIC surged on 27.5 pp from -22.1% to 5.5% in 2015. ROE jumped on 41.6 pp from -28.6% to 13.0% in 2015.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.9x and Debt / EBITDA is 1.6x. Net Debt / EBITDA dropped0.9x from to -0.9x in 2015. Debt jumped on 17.5% in 2015 while cash surged on 25.5% in 2015.

Valuation

The company's trades at EV/EBITDA 4.1x and P/E 10.8x while industy averages are 10.5x and 26.1x.

Appendix 1: Peers in Construction & Materials

Below we provide North Midland Construction benchmarking against other companies in Construction & Materials industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Kingspan Group ($KGP)		5.3%	9.1%	6.4%	46.7%
Accsys Technologies ($AXS)		9.5%	25.5%	78.0%	37.5%
Billington Hldgs ($BILN)		-34.0%	8.4%	14.5%	25.8%
Crh ($CRH)			-0.3%	4.9%	25.0%
Clarke(T.) ($CTO)		5.5%	12.0%	-4.2%	16.6%
Median (23 companies)	31.1%	3.6%	5.6%	8.9%	1.6%
North Midland Construction ($NMD)		1.0%	5.1%	8.8%	12.7%

Top companies by Gross margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inch Kenneth Kajang Rubber ($IKK)	37.8%	46.5%	24.5%	21.7%	51.7%
Swp Group ($SWP)	39.2%	43.0%	48.1%	39.2%	49.7%
Heath(Samuel)& Sons ($HSM)	49.2%	49.5%	47.3%	48.6%	47.6%
James Halstead ($JHD)		41.2%	41.6%	41.0%	41.7%
Michelmersh Brick Hldgs ($MBH)	29.9%	35.3%	28.4%	31.1%	38.2%
Median (21 companies)	25.6%	23.6%	25.2%	26.6%	29.3%
North Midland Construction ($NMD)	24.2%		23.6%	26.7%	27.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Lucky Cement Ltd ($LKCS)	25.0%	31.5%	26.8%	24.4%	26.5%
James Halstead ($JHD)		20.2%	19.8%	20.1%	20.9%
Michelmersh Brick Hldgs ($MBH)	11.8%	10.6%	7.9%	14.1%	20.3%
LSR Group OJSC ($LSRG)	19.8%	20.2%	19.5%	22.9%	19.3%
Asia Cement Corp ($ASCD)	20.2%	13.5%	16.3%	18.3%	14.8%
Median (23 companies)	8.6%	8.7%	7.4%	9.7%	9.7%
North Midland Construction ($NMD)	0.4%	1.4%	-2.3%	-0.6%	1.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inch Kenneth Kajang Rubber ($IKK)	15.9%	74.2%	5.4%	12.8%	54.9%
Lucky Cement Ltd ($LKCS)	7.3%	3.2%	5.2%	6.9%	12.0%
Billington Hldgs ($BILN)	3.6%	1.0%	1.1%	2.9%	10.8%
Low & Bonar ($BD46)		3.5%	2.8%	4.6%	9.1%
Superglass Hldgs ($SPGH)	6.4%	12.9%	14.2%	3.4%	7.9%
Median (23 companies)	2.1%	2.2%	2.5%	2.6%	2.9%
North Midland Construction ($NMD)	0.6%	0.4%	0.8%	0.4%	0.5%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
James Halstead ($JHD)		49.3%	46.2%	46.7%	45.3%
Alumasc Group ($ALU)	12.6%	6.5%	17.5%	22.6%	36.0%
Heath(Samuel)& Sons ($HSM)	8.1%	9.7%	8.7%	19.7%	32.0%
Aukett Swanke Group ($AUK)	-41.2%	2.7%	11.4%	27.3%	31.6%
Lucky Cement Ltd ($LKCS)	13.5%	23.8%	22.9%	20.3%	20.0%
Median (23 companies)	5.7%	4.8%	7.5%	7.4%	8.0%
North Midland Construction ($NMD)	-4.4%	3.8%	-35.2%	-22.1%	5.5%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Asia Cement Corp ($ASCD)	4.3x	7.8x	6.9x	6.8x	8.6x
Crh ($CRH)		2.0x	3.6x	1.6x	3.1x
Low & Bonar ($BD46)		2.7x	2.1x	2.1x	2.4x
Saint-Gobain(Compagnie De) ($COD)	1.8x	2.1x	2.0x	2.1x	1.4x
Kingspan Group ($KGP)	1.4x	1.2x	0.6x	0.8x	1.1x
Median (19 companies)	1.3x	1.7x	0.7x	0.5x	-0.1x
North Midland Construction ($NMD)	-10.4x	-1.4x			-0.9x

North Midland Construction stock price chart

North Midland Construction financials

mln.	FY2010	FY2011	FY2012

Revenue	164.5	167.2	168.9
EBITDA	5.372	0.720	2.402
Net income	2.518	-0.757	0.473
CAPEX	0.634	1.021	0.634
Debt	1.598	1.741	1.803
Cash	8.911	9.229	5.065

About North Midland Construction

North Midland Construction PLC is engaged in the civil engineering, building and mechanical, and electrical engineering businesses in the United Kingdom. The company constructs, designs, and builds projects for water businesses and the private sectors. It is involved in recycling, waste transfer, composting, and generating energy from the waste field; laying ducting and mains; construction of switchgear buildings, and transformers and substations with infrastructure for power stations; and undertaking works in potable water treatment, potable water mains, sewage treatment and sewerage schemes, and industrial effluent treatment projects for water companies, as well as cable and fiber-optic contracts. The company also undertakes contracts in the railway infrastructure that include bridge and station refurbishment, training depots, pedestrian footbridges, line side structures, and earth retaining and embankment works; and projects that include works to steelworks, food processors, and pharmaceutical facilities for local, regional, national, and international blue chip companies and developers. In addition, it is engaged in the construction and refurbishment of highway bridges and footbridges, retaining walls, and culverts; public realm and highway works; undertaking of environmental enhancement projects, including earthmoving, flood defense, and rural landscaping schemes; and infrastructure works in telecommunications, electricity, and water sectors. Further, the company provides mechanical, electrical, instrumentation, control, and automation contracting services, as well as waste water and water treatment products and systems. North Midland Construction PLC was founded in 1946 and is headquartered in Sutton-in-Ashfield, the United Kingdom.