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23 Oct 2020 | 11:41

Nexus Infrastructure expecting smaller loss as markets slowly recover

(Sharecast News) - Infrastructure services company Nexus Infrastructure updated the market on its full-year of trading on Friday, reporting that trading in the second half was "severely impacted" by the Covid-19 pandemic.

The AIM-traded firm said the majority of its sites were reopened by July, with the recovery in activity levels since then described as "encouraging", although significantly lower than the first half.

Of its three businesses, Tamdown was the most impacted by the continued uncertain macroeconomic backdrop and the implementation of additional health and safety procedures.

Nexus said that lower level of activity during its traditionally strong trading period had , as expected, resulted in it being loss making in the second half of the year ended 30 September.

As a result, the company said it would report a loss before tax for the year, although at an improved level from its expectations at the time of its equity issue in June.

The board said it was still challenging to predict with any certainty how the firm's end markets would recover, and thus it was still unable to provide market guidance.

However, the company said it hoped to be able to reinstate guidance at the time of its full-year results in December.

The group said its order book was down 17% year-on-year, but overall remained "strong" at £282m.

It said the reduction was primarily driven by Tamdown, where the order book decreased to £92.8m as a result of reduced activity levels, pricing pressures and customers taking a more cautious approach to starting new sites, given the impact of Covid-19, Brexit uncertainty and the end of the temporary stamp duty holiday.

With that reduced activity on site, Tamdown said it was experiencing some margin pressure, and as a result, the cost base had been reduced with a number of redundancies for office and site-based staff.

TriConnex's performance was described as "resilient", and in-line with expectations, with the order book ending the year at £185.4m, up from £184.8m.

That represented a strong performance by TriConnex, the board said, driven by the "up-front, mission critical nature" of securing utility network connections on development sites.

Its eSmart Networks division was progressing in-line with expectations, with the order book up 52% to £3.8m, driven by increased demand for electric vehicles and associated supporting infrastructure.

The board said the company's strong balance sheet had been maintained, assisted by the equity issue in June, with a high cash and cash equivalent balance of £32.1m, up from £27.4m year-on-year, and a net cash balance after bank borrowings and finance leases of £19.2m, rising from £18m/

That included the continued investment in the new Nexus Park head office, with total spending in the year of £6.3m.

The board said the Nexus Park build programme remained on track, with the opening expected in the spring of 2021.

Nexus' directors said they believed the group was in a "strong position" to deliver organic growth, aided by the structural undersupply in the UK housebuilding market and government stimulus for the sector.

It said that, like many industry suppliers, it was still experiencing caution from customers, particularly within Tamdown, as a result of the continuing uncertain macroeconomic backdrop.

The board said it was encouraged by the group's strong balance sheet and order book, which positioned Nexus for growth in the years ahead, particularly within TriConnex and eSmart Networks where market fundamentals were "strong", trading momentum was "encouraging", and the government was actively supporting investment into green technologies and infrastructure.

"This year has clearly been challenging across the whole of the industry and we have taken the necessary mitigating actions to protect the business," said chief executive officer Mike Morris.

"We have an established reputation for delivery amongst our customers, we have maintained our strong balance sheet with the support of our shareholders and we have an order book which provides us with visibility of future earnings."

Morris said that looking forward, Nexus was expecting to return to profitability next year.

"There still remains a fundamental shortage of housing and infrastructure in the UK and we have positioned ourselves well in terms of our established relationships, initiatives through our eSmart Networks and TriConnex businesses, and are well positioned to address the anticipated increased level of activity in the year ahead."

At 0850 BST, shares in Nexus Infrastructure were down 7.35% at 126p.
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