Even when it was called North Midland Construction, nmcn (LON: NMCN) was not a well know fully listed company yet it has probably been listed for longer than most of the other companies on the premium list.

Management is starting to raise the profile of the Nottinghamshire-based business and the company should start to attract the attention of investors that the much-increased dividend and the share price performance in the past three years warrants.

Employing Progressive Research to write analyst reports on the company broadens the information available to investors.

Some people turn their nose up at paid-for research, but it is better than having little or no information on a company, and anyway what is house broker research other than paid-for research.

Loss-making legacy contracts have come to an end and there is a focus on preventing poorly performing contracts being secured. Margins are being improved. Cash is also being managed more carefully.

Construction is a tough market where margins can be wafer thin. However, most of the revenues come from the water sector, where there is continued investment in infrastructure. The investment can be cyclical within the five year cycle but spending has to be maintained at high levels.

Management reckons 90% of its business is repeat or based on framework agreements.


The majority of revenues come from the water sector, which has a record of significant investment in infrastructure, partly to catch up on the low levels of investment 40 or 50 years ago. Most major UK water companies are customers.

The biggest customer is Severn Trent and the Frankley water treatment works project was the company’s largest ever contract.  

Investment is based on five-year AMP (asset management plan) cycles. The AMP6 period ends next March and then AMP7 takes over. It can take time for work to build up in a five year cycle, so the main benefits of AMP7 are a couple of years away. Even so, the total forecast spending on AMP7 is £50bn.

Flood defence work is also required, and this spending is running at £600m a year.

Built environment

This part of the business works on roads, telecoms infrastructure, housing, health and other construction projects. The main growth is coming from infrastructure projects.

Student accommodation and buy to rent development are potential growth areas. There is also potential in housebuilding.


In the first half of 2019, nmcn increased revenues from £161.2m to £184m, while pre-tax profit improved from £2.5m to £3.5m. There was net cash of £15.6m at the end of June 2019.

The main growth in revenues came from the water division, while margins Improved in the built environment division. Both divisions improved profit.  

The order book is worth £456m with the main increase coming from the built environment division, which accounts for one-fourth of the order value.


The dividend was tripled last year, although dividend cover was still 3.5 times. The latest interim was increased by 50% to 9p a share.

The full year dividend is expected to increase from 18p a share to 20p a share. This suggests a lower final dividend, so it could be conservative.


Liquidity in the shares is limited. There are only a couple of days in the past three years where there has been a significant value of shares that have been traded.

This has to be kept in mind when considering an investment. The steps taken by management should help to improve liquidity, though.


Net tangible assets per share of 212.3p are forecast for the end of 2019.

A full year profit of £7.4m is forecast, up from £6m. At 560p, the shares are trading on less than ten times prospective earnings. The forecast yield is 3.4%.

A construction-based business is likely to have a low rating, but the predominance of the higher margin water sector business means that nmcn is an attractive investment.