Nexus Infrastructure : Full year results for the year ended 30 Sept 2019

10 December 2019

Nexus Infrastructure plc ('Nexus' or the 'Group')

Full year results for the year ended 30 September 2019

Revenue growth across all Group businesses

Mike Morris, Chief Executive of Nexus, a leading provider of essential infrastructure services, utilities connections and electric vehicle infrastructure, comments:

'We believe that the structural demand for housing in the UK, the low interest rate environment and Government-supported incentives in the sector from all major political parties, all play well to Nexus' strengths as a trusted supplier. On the basis that trading conditions remain stable, the Group is well placed to maximise opportunities within its chosen markets and deliver future value for shareholders.'

Financial Highlights - in line with revised expectations:

	2019	2018	Change
Revenue	£155.1m	£134.9m	+15%
Gross profit	£27.9m	£27.6m	+1%
Gross margin	18.0%	20.5%	-2.5%
Operating profit	£6.0m	£9.4m	-36%
Profit before tax	£5.7m	£9.2m	-38%
Basic earnings per share	11.0p	19.1p	-42%
Dividend per share	6.6p	6.6p	-
Net cash	£22.6m	£20.0m	+13.0%
Order Book	£338.9m	£289.7m	+17.0%

· Revenue growth across all of the Group's businesses, reflecting continuing demand for the Group's services

· Record order book, with growth of 17%

· Dividend maintained at 6.6 pence per share

· Strong balance sheet with net cash increasing by 13%

Trading Highlights - by segment:

Tamdown

· Revenue increased by 9.5% to £112.2m (2018: £102.5m)

· Gross profit of £14.5m (2018: £17.2m)

· Gross margin of 13.0% (2018: 16.8%)

· Operating profit of £4.0m (2018: £8.0m)

· Order book up 6.5% to £151.6m (2018: £142.4m)

· 10 new customers secured in the year

· Operational review addressing delivery issues, stabilising gross margin

TriConnex

· Revenue up 29.8% to £41.8m (2018: £32.2m)

· Gross profit up 23.4% to £12.9m (2018: £10.4m)

· Gross margin of 30.8% (2018: 32.4%)

· Operating profit up 15.4% to £4.3m (2018: £3.7m)

· Order book up 26.1% to £184.8m (2018: £146.5m)

· 27 new customers secured in the year

eSmart Networks

· Revenue totaled £2.1m (2018: £0.3m) as customer base increased and diversified

· Investment of £0.6m as business continues to scale up in parallel to the growing pace of the EV charging infrastructure market

· Continuing period of investment, with profitability expected towards the end of 2020

Established growth strategy:

· Well-defined strategy focused on four key drivers:

o Increasing market share within current geographies

o Expansion into new geographies

o Diversification into new growth sectors

o Leveraging customer relationships to enhance cross-selling within the Group

· Inorganic growth plans focused on disciplined approach to bolt-on acquisitions

Notes

¹ Net cash is Cash and cash equivalents less Borrowings

Enquiries:

Nexus Infrastructure plc Michael Morris, Chief Executive Officer Alan Martin, Chief Financial Officer	Tel: [phone]
Numis Securities Limited (Nominated Adviser & Broker) Oliver Hardy (Nomad) Heraclis Economides Ben Stoop	Tel: [phone]
Financial Public Relations Camarco Ginny Pulbrook Tom Huddart Oliver Head	Tel: [phone]

Notes to Editors:

Nexus is a leading provider of essential infrastructure services to the UK housebuilding and commercial sectors. The Group comprises: Tamdown, a provider of specialised civil engineering, infrastructure and concrete frame services; TriConnex which designs, installs and connects utility networks to properties on new residential and commercial developments; and eSmart Networks which focuses on electric vehicle charging and smart grid infrastructure.

Tamdown has a well-established market position having been in operation for over 40 years and currently counts amongst its customers the majority of the top ten largest UK housebuilders. TriConnex was established in 2011 to take advantage of deregulation in the utilities market with the goal of being recognised as the UK's leading independent provider of utility connections to new developments. eSmart Networks was set up in 2017 to respond to the UK's need for charging infrastructure as the transition from internal combustion engine vehicles to electric vehicles gathers pace.

Chairman's Statement

I am pleased to report the results for the year ended 30 September 2019.

Overview of the year

The Nexus business model consists of Tamdown's well-established market position as a leading provider of essential infrastructure services to the UK's largest housebuilders, TriConnex's growing utilities connection business, and eSmart Networks, which is establishing itself as a market leader in the provision of electric vehicle charging infrastructure, battery storage and specialised network services.

The Group reported strong revenue growth for the year, with revenue growing 14.9% to a record £155.1m. As previously reported, revenue growth in Tamdown was limited to 9.5% by industry-driven delays and changes to customer build programmes, which affected resource planning, increased mobilisation costs and impacted efficiency on site. In addition, customer pricing pressure, along with cost inflation, have resulted in increased pressure on revenues and margin, however, the Group has taken mitigating actions to ensure the business is more resilient. TriConnex revenue growth of 29.8% reflects an overall increase in the number of projects secured and the acceleration of certain projects in the period, whilst eSmart Networks continues to successfully scale-up and establish itself within the growing EV market.

The Board is encouraged by the level of growth in the Group's order book which has been driven by growth in each division: Tamdown's order book is up by 6.5% to £151.6m, TriConnex's by 26.1% to £184.8m and eSmart Networks up by £1.7m to £2.5m. The Group order book ended the year at £338.9m, a 17% year-on-year increase which provides Nexus with good visibility of earnings for the year ahead.

The industry-driven delays suffered by Tamdown adversely affected the Group's overall operating profit, which was partially mitigated by increased profits from TriConnex, resulting in the Group's operating profit decreasing by £3.4m to £6.0m (2018: £9.4m). The Group's financial results also include the investment in the year of £0.6m in eSmart Networks. We have continued to invest in eSmart Networks, as we have identified significant opportunities to provide electric vehicle charging infrastructure, battery storage and specialised network services. The UK's need for charging infrastructure is gathering pace with an accelerated transition from the internal combustion engine to electric vehicles. eSmart Networks has made good progress in this new, rapidly evolving market and is now seen as a market leader within the electric vehicle infrastructure sector.

The profit for the year attributable to equity holders of the parent company decreased by 42.8% to £4.2m (2018: £7.3m) and the basic earnings per share decreased to 11.0p per share (2018: 19.1p per share).

The Group maintained strong cash discipline, which resulted in a continued high cash and cash equivalent balance of £27.4m (2018: £26.4m), resulting in net cash at year end of £22.6m¹ (2018: £20.0m).

¹Net cash is Cash and cash equivalents less Borrowings

Returns to shareholders

As a listed company, one of our primary objectives is to deliver value to shareholders. The Board remains confident in the strength of the Group and its position within its chosen markets. The Board is maintaining its progressive dividend policy and having already paid an interim dividend in the year, which was in line with the prior year, of 2.2p per share (2018: 2.2p per share), the Board is proposing a final dividend of 4.4p per share (2018: 4.4p per share) for the year ended 30 September 2019. If the dividend is approved at the Annual General Meeting ('AGM'), the dividend for the year will be in line with the prior year at 6.6p per share. The total dividend for the year of £2.5m (2018: £2.4m) has a dividend cover of 1.7 times the Group's profit after tax. The dividend will be paid on 25 March 2020 to shareholders on the register at close of business on 21 February 2020. The shares will go ex-dividend on 20 February 2020.

Looking forward, the Board anticipates the dividend cover to return over time to a cover of around 3.0 times which will enable shareholders to benefit as the Group delivers on its performance targets, whilst continuing to invest in the growth plans of the business.

Board and governance

During the year, Ffion Griffith joined the Board as a Non-Executive Director with effect from 1 November 2018. Ffion is a Fellow of the Chartered Institute of Personnel and Development and has 25 years' experience in senior roles across a range of sectors including technology, professional services and private equity.

The Board now consists of six members, including four Non‑Executive Directors and two Executive Directors. In line with The QCA Corporate Governance Code ('Code'), the Board has reviewed the independence of the Non-Executive Directors and considers all the Non-Executive Directors to be independent.

People

A primary driver of the Group's success is the team of highly skilled, driven and loyal employees across the businesses. Nexus places great importance on engaging with and developing its employees and providing a platform for personal growth and successful career development. On behalf of the Board, I would like to congratulate and thank them for their continued hard work and dedication.

Outlook

Looking ahead, whilst there is continued economic and political uncertainty, the fundamental market growth drivers for our business are positive. Provided that trading conditions remain stable, the Group's continued focus on the customer, an increased concentration on efficiency, a strong order book and a healthy balance sheet support the Board's confidence in the prospects for the Group in the coming years.

Geoff French

Non-Executive Chairman

9 December 2019

EXECUTIVE REVIEW

Overview

It is pleasing to report revenue growth across all of the Group's businesses for the full year. Following a challenging period of trading, which reflected industry-driven planning delays and changes to build programmes across a number of major projects, Tamdown's revenue has grown by 9.5% this year. The strong revenue growth by TriConnex reflects the high level of projects secured during FY18 and FY19, which has increased the overall number of contracts now recognising revenue, along with a number of projects which have been accelerated by customers due to end customer demands. The revenue for eSmart Networks has increased by more than seven times as it establishes itself in these new and growing markets.

The profitability of the Group this year has been significantly impacted by the challenges experienced by Tamdown. A thorough review of Tamdown's delivery mechanisms has been undertaken, with changes implemented to resource management, procurement and refining our customer interaction, to ensure that profitability will improve in future periods. TriConnex continues to expand both geographically and through diversifying its customer base. As anticipated as this business matures, the margins have softened across the new customer base. Investment in eSmart Networks has continued during the year with the division growing from 9 to 24 employees to develop and service the growing customer base, which includes ChargePoint Services, Engenie, Ionity, and Gridserve.

The continued growth of the Group's order book during the year is a testament to the focus on the customer and the value that is brought to projects by each of the divisions.

The Group's established divisions service the UK housing market, which is structurally undersupplied and supported by Government, meaning demand remains strong. eSmart Networks has significant opportunities within a diverse and growing sector, which includes charging for cars, transport and delivery vehicles, with the volumes of sales for all of these vehicles currently growing at over 80% year on year, further supported by the Government's 'Road to Zero' commitments.

Growth Strategy

The Group's mission is to be recognised as the leading provider of essential infrastructure services in the UK. The Group's strategic objectives are to deliver outstanding performance through a focus on innovation and customer service, which will lead to profitable growth; and to build on existing strong market positions both organically and through complementary earning enhancing acquisitions.

The Group's organic growth strategy is focused on four key drivers:

· increasing market share within our current geographies,

· expanding into new geographic markets,

· diversification into new growth sectors and

· leveraging customer relationships to enhance cross-selling within the Group.

In addition to organic growth, further growth will come from the successful sourcing, execution and integration of acquisitions.

The Group is taking a disciplined approach to acquisitions, seeking to enhance shareholder value with acquisitions that are linked, or closely associated, with TriConnex or eSmart Networks.

Financial performance

Revenue across all of the Group's divisions increased during the year, with the Group's full year revenue increasing by 14.9% to £155.1m (2018: £134.9m). Tamdown's revenue increased by 9.5% to £112.2m (2018: £102.5m). TriConnex recorded strong revenue growth of 29.8%, with revenue increasing by £9.6m to £41.8m (2018: £32.2m) and eSmart Networks' revenue increased £1.8m to £2.1m as it starts to build a customer base and becomes a leader in this new EV sector.

Gross profit for the year marginally increased to £27.9m (2018: £27.6m) with the overall gross margin at 18.0% (2018: 20.5%). The delays and build programme changes experienced by Tamdown impacted efficiency, which along with customer pricing pressure and higher than expected cost inflation decreased the gross margin to 13.0% (2018: 16.8%). The gross margin achieved by TriConnex in the year was 30.8% (2018: 32.4%) with the decrease due to successful expansion into new regions and a broadening of the customer base, which tend to record lower margins initially. The margin for eSmart Networks continued to improve, with a gross margin for the year of 23.4% (2018: negative 14.5%) as efficiencies continue to be identified and implemented.

Administrative expenses for the Group increased in the year, with additional expenditure on people related costs and depreciation, to a total of £21.9m (2018: £18.2m). The Group's operating profit for the year, which includes the investment in eSmart Networks of £0.6m, totalled £6.0m (2018: £9.4m). The Group operating margin for the year was 3.9% (2018: 7.0%). The Group operating margin before the investment in eSmart Networks was 4.3% (2018: 7.5%).

Profit for the year attributable to equity holders of the parent company was £4.2m (2018: £7.3m).

Other financial information

Order book

Demand from customers for the Group's services has continued during the year and each division has significantly increased their order books: Tamdown's order book is up by 6.5% to £151.6m, TriConnex's by 26.1% to £184.8m and eSmart Networks has achieved £2.5m. The Group order book at 30 September 2019 is at a record level of £338.9m, with the year-on-year increase of a further 17.0%. We believe that this reflects Nexus Infrastructure's reputation for quality service and delivery.

Net finance costs

The net finance charge for the year totalled £0.28m (2018: £0.22m). Interest received on bank deposits totalled £0.06m (2018: £0.03m) and interest payable totalled £0.34m (2018: £0.25m). Interest payable constitutes interest on bank borrowings of £0.20m (2018: £0.21m) and interest on lease liabilities, which have increased to £0.14m (2018: £0.04m), with £0.07m due to the implementation of IFRS 16: Leases.

Tax

The tax charge for the year was £1.5m (2018: £1.9m), representing an effective tax rate of 26.4% (2018: 20.8%). The tax charge for the period included an exceptional adjustment in respect of prior periods. The exceptional item has been recorded as the tax charge relating to 2016 and previous years as the tax charge in these years has been found to be understated. The understatement is not material in any year to which it relates or in total but has been considered exceptional due to its nature. Going forward we expect our tax rate to be broadly in line with the prevailing corporation tax rate.

Earnings per share

Basic earnings per share reduced to 11.0p, compared to 19.1p in 2018, with the decrease due to the decreased profitability of Tamdown, the margin impact from the growth of TriConnex and the continued investment in eSmart Networks. The impact of the exceptional tax adjustment was to reduce the earnings per share by 1.0p. The diluted earnings per share were 10.6p (2018: 18.9p).

Dividends

As noted in the Chairman's statement, the Board has recommended a final dividend of 4.4p per share (2018: 4.4p per share), giving a total dividend for the year in line with the prior year of 6.6p per share (2018: 6.6p per share). The total dividend results in the dividend cover of 1.7 times, which is ahead of the Group's guidance on dividend cover of 3.0 times. It is anticipated that the dividend cover will revert to the guided level over time as profitability improves. The total cost of the dividend payments, including the interim dividend, will be £2.5m.

Statement of financial position

The Group continues to maintain a strong balance sheet with shareholders' funds increasing during the year to 30 September 2019, by £1.5m to £23.3m (2018: £21.8m), the movement included the payment of dividends totalling £2.5m, which was mitigated by the trading performance of the Group companies. The Group has invested £3.9m in new plant and motor vehicles during the year, recorded as right of use assets, including 60 excavators to refresh and expand the plant fleet to more efficient and reliable machinery.

Non-current assets increased over the year by £4.9m to £14.2m (2018: £9.3m), with the increase principally due to the inclusion of £4.8m of right of use assets, which were included for the first time this financial year following the adoption of IFRS 16: Leases from 1 October 2018. The right of use assets include the new lease additions of plant and motor vehicles totalling £3.9m. Current assets increased by £8.5m to £80.7m (2018: £72.2m) with inventories increasing by £0.3m, trade and other receivables increasing by £5.9m, contract assets by £1.3m and cash balances increasing by £1.0m to £27.4m (2018: £26.4m).

Total liabilities increased by £12.m to £71.6m (2018: £59.6m), with trade and other payables increasing by £5.9m, contract liabilities increasing by £3.9m, lease liabilities increasing by £4.0m due to the implementation of IFRS 16: Leases and borrowings decreasing by £1.7m with the repayment of the term loan.

Cash flow

The Group generated £1.0m (2018: utilised £0.7m) of cash in the year, resulting in a cash and cash equivalent balance at 30 September 2019 of £27.4m (2018: £26.4m).

Operating cash flows before working capital movements, generated £8.7m (2018: £10.6m). Working capital decreased during the year by £1.5m (2018: investment £4.1m), with an increase in payables only partly mitigated by the increase in debtors, resulting in cash generated from operating activities of £10.2m (2018: £6.5m). Tax and interest payments amounted to £2.0m (2018: £1.8m). Cash utilised in investing activities totalled £1.3m (2018: £0.2m), with £2.1m used to acquire fixed assets. Net cash outflows from financing activities totalled £5.9m (2018: £5.1m), including £2.5m (2018: £2.4m) on dividend payments.

Treasury risk management

The Group's cash balances are centrally pooled and invested, ensuring the best available returns are achieved consistent with retaining liquidity for the Group's operations. The Group deposits funds only with financial institutions which have a minimum credit rating of A. As the Group operates wholly within the UK, there is no requirement for currency risk management.

Summary and Outlook

We have continued to grow Group revenues and the order book growth provides good visibility for the future. The mitigating actions we have undertaken within Tamdown should ensure that the business is more resilient. Confidence in maximising future opportunities is further enhanced by the high year end net cash balance, achieved through tightly controlling working capital, and the availability of the new revolving credit facility, along with the record order book.

We believe that the structural demand for housing in the UK, the low interest rate environment and Government-supported incentives in the sector from all major political parties, all play well to Nexus' strengths as a trusted supplier. On the basis that trading conditions remain stable, the Group is well placed to maximise opportunities within its chosen markets and deliver future value for shareholders.

Mike Morris Alan Martin

Chief Executive Officer Chief Financial Officer

9 December 2019

OPERATIONAL REVIEW

Tamdown

Financial and operating performance

Revenue for Tamdown increased by 9.5% to £112.2m (2018: £102.5m). The increase follows on from an increase in the number of contracts won in the latter part of the previous financial year, which resulted in a strong order book balance at the commencement of the year. The work winning continued into the current year, with contract awards from both repeat customers as well as contract awards from 10 new customers during the year. As previously reported, Tamdown has seen delays and changes to customer build programmes that has postponed activity on the affected sites which has delayed the associated revenue. The delays and changes to build programmes affected Tamdown's resource planning, increased mobilisation costs and so impacted efficiency. In addition, customer pricing pressure and higher than expected cost inflation have resulted in reduced revenue and additional costs. Accordingly, Tamdown's gross profit for the year was £14.5m (2018: £17.2m), which equated to a gross margin of 13.0% (2018: 16.8%). Mitigating actions have been taken to ensure that the gross margin has been stabilised.

Administrative expenses totalled £10.5m (2018: £9.2m), with cost increases in line with revenue growth and depreciation increasing by £0.7m due to fleet expansion. During the year Tamdown invested £3.9m in 60 excavators, 10 dump trucks and various motor vehicles in order to refresh and expand the fleet and drive further operational efficiencies.

Operating profit totalled £4.0m (2018: £8.0m) and achieved an operating margin of 3.6% (2018: 7.8%). The margin deterioration is due to revenue growth being limited, project costs increasing and an increase in administrative expenses.

The Tamdown order book continued to grow over the year, with the order book at 30 September 2019 up 6.5% year-on-year to £151.6m (2018: £142.4m). This growth was due to a number of factors, including current customers placing both new follow-on phases and new projects with Tamdown as it continues to deliver quality service, along with winning work from new customers and an increase in the average contract size won. The size and the quality of the order book provides confidence for our future growth plans.

Our markets

Tamdown customers are UK housebuilders and affordable housing developers, including housing associations. As such, the UK housebuilding market is key to Tamdown. There is currently general uncertainty posed by the UK's forthcoming exit from the EU. However, the fundamental market growth drivers for our business are positive since the housing market has been in a long-term position of structural undersupply as the number of new houses built has failed to keep pace with the rate of household formation. The National Housing Federation has identified the need for up to 340,000 new homes in England per year up to 2031, which is ahead of the Government estimate of 300,000 new homes target to tackle the housing shortage. There is the expectation that the housing deficit will remain over the long term. The prevalence of this deficit has attracted a significant amount of Government stimulus to the sector.

Tamdown operates in the South East of England and London, where the undersupply of housing appears to be more acute compared to the rest of the UK. The London market has cooled during 2019, with fewer projects commencing. Accordingly, Tamdown is focusing on the projects which are becoming available, being residential schemes in the surrounding areas in the South East. Tamdown works with the majority of the quoted housebuilders, who account for approximately 50% of total private new build volumes. This dominance is expected to continue as these customers work through their land bank and develop larger schemes.

Tamdown also works with a number of housing associations that deliver mixed tenure developments and are focused on the affordable homes segment of the housing market who offer variety and strength to its customer base.

In June 2018 the Ministry of Housing, Communities and Local Government issued their Single Departmental Plan which set out its objectives and how they would be achieved. The first objective was to 'Deliver the Homes the Country Needs', which was to be achieved by fulfilling matters such as progressing the Housing white paper reforms to reduce the obstacles to housebuilding and help local authorities, developers and small to medium-sized housebuilders meet housing needs.

The October 2018 Budget confirmed the extension of Help to Buy until 2023, with a number of changes to price eligibility levels. The changes are not expected to have an adverse impact on the usage of the scheme and the extension provides certainty to housebuilders.

Despite the current political uncertainty, there is general acceptance that there is a deficit in housing supply and so with Tamdown's established market position as one of the leading providers of infrastructure and engineering services to major UK housebuilders, we are well placed to benefit from the Government's current and future stimulus.

Growth strategy

Tamdown's ambitions are to grow profits in a sustainable manner through the successful delivery of its strategic goals including:

Margin enhancement:

Tamdown has a strong reputation for delivering quality projects for customers, however, the delays and changes to build programmes that Tamdown experienced during this financial year highlighted the need to review and enhance the effective delivery of projects.

There will be an ongoing focus on how Tamdown plans and procures the resources required on projects, the mobilisation process and the interaction with customers before and during projects, to ensure that projects are delivered safely, on time, to a high quality and profitably.

Multi-phase projects:

A significant element of Tamdown's work is from larger, multi-phase projects, which provide a good level of visibility of future revenues.

These projects are typically large housing developments which are completed in stages. Once Tamdown has won an initial phase it is typically retained for the remainder of the scheme, the phases of which can extend over many years. With Tamdown's extensive customer base and long-standing reputation for great customer service with the leading housebuilders and housing associations, the Company is well placed to be awarded multi‑phase projects.

Market penetration:

Tamdown has strong relationships with many regional businesses of blue-chip customers. Within the geographies where Tamdown operates a number of existing customers have regional businesses to which Tamdown does not currently provide services. Accordingly, there is an opportunity to increase market share by winning projects with these regional businesses. This is likely to be achieved through the provision of excellent customer service to current customers, which will lead to recommendations to other regions. Tamdown has been successful during the year in deepening its market penetration by gaining 10 new customers, 7 of which were regional businesses of current customers.

Customer diversification:

The majority of Tamdown's customers are large residential housebuilders. Tamdown is developing relationships with customers that address the affordable housing market, such as housing associations that undertake developments themselves and main contractors that build on behalf of housing associations.

The skills that Tamdown employs are transferable from the residential sector to other sectors and services. The infrastructure activities that Tamdown undertakes for the residential sector such as earthwork optimisation, highway works, remediation and drainage solutions, are all services that can also be extended to non-residential customers.

Geographic expansion:

Tamdown has strong relationships with blue-chip customers in the South East of England and London. Tamdown intends to continue to use these relationships to drive customer penetration within the regions in which Tamdown currently operates. This strategy has resulted in 7 new regional customers during the year. The division also looks to expand geographically via recommendations and referrals from existing customers who also operate in neighbouring regions, whilst also developing relationships with new customers.

Outlook

Tamdown has an established market position, providing quality services to UK housebuilders and is developing key relationships with the Build to Rent and affordable housing sector developers. The backdrop of Government stimulus to counter the housing supply deficit along with our strong order book, provides us with confidence that our existing and new customers will continue to demand our services and our business is well positioned to grow.

TriConnex

Financial and operating performance

Revenue for TriConnex increased by 29.8% to £41.8m (2018: £32.2m). The high level of growth was achieved following an increased volume and value of projects being secured during FY18 and FY19, which has increased the overall number of contracts now generating revenue, along with a number of projects which have been accelerated by customers due to end customer demands. TriConnex is engaged at the very early stage of developments with its customers, and often secures contracts prior to land acquisition. The increase in the order book illustrates that customers continue to be active. However, primarily due to the level of pre-commencement conditions set by the local authorities slowing the preparation of sites prior to construction commencing, the time between accepting orders and being able to take revenue from a project is still lengthy.

TriConnex is a high gross margin business, principally due to the more technical, office based, added value nature of the services it provides, resulting in a higher proportion of overhead costs. The gross margin decreased during the year to 30.8% (2018: 32.4%) as TriConnex has expanded both geographically and by diversifying its customer base, with margin levels with new customers being lower than with established customers.

As TriConnex provides a full concept to connection service with a significant amount of desktop planning, research and technical design. The majority of TriConnex's staff are office based. During the year TriConnex has achieved revenue growth of 29.8%, which, in order to maintain TriConnex's reputation for high level of service has required additional resources. Accordingly, headcount and resources have been added during the year in an efficient manner. Although overheads were increased to £8.6m (2018: £6.7m) this was less than the revenue growth achieved during the period.

Operating profit increased by 15.4% to £4.3m (2018: £3.7m) with an operating margin of 10.3% (2018: 11.6%).

The order book grew by 26.1% over the year to £184.8m (2018: £146.5m) The growth is due to a number of factors including: continued repeat business from customers that have benefited from TriConnex's focus on customer service; new small and mid-sized housebuilder customers; an increased number of customers operating in the affordable sector; and growth within both the South West and Midlands regions.

Our markets

The utility connections market consists of three regulated utilities: electricity, gas and water, and one unregulated utility, fibre. Following the opening of the connections market to competition, TriConnex entered the market in 2011 to offer electricity and gas connections, expanding to offer water connections in 2014, fibre connections in 2016 and domestic electric vehicle charging in 2019. Today approximately 60% of gas and approximately 30% of electricity connections in the UK are undertaken by independent connection providers and expectations are that these levels will continue to grow.

TriConnex continues to differentiate itself in the market through its provision of a full multi-utility connection offer, coupled with a deep focus on outstanding customer service. Historically, utility connections have been a challenge for many developers, however TriConnex's core aim is to apply its customer understanding to provide an enhanced experience and deliver connections on time, every time. With the stated Government aim of delivering 300,000 homes a year by the mid 2020s, TriConnex can play a major role in supporting developers achieve this target.

TriConnex's core customer base consists of a mix of large and mid-sized residential developers, who are offered a full multi-utility service. Building on its strong position in the gas and electricity connections market, recent regulatory changes have supported both its fibre and water proposition. In fibre,the recent increase in tier 1 Internet Service Providers providing services across independent fibre networks provides developer customers with a more extensive, viable choice in network. In water, Ofwat have mandated that all water companies publish their charging regime as well as shortening the application process for independent water adopters. In addition, a new asset adoption code is under development by Ofwat to simplify the water adoption process. All these changes should support greater levels of competition in the fibre and water connections markets, in which TriConnex is well placed to benefit.

The UK Government has passed legislation in June 2019 requiring the UK to bring all greenhouse gas emissions to net zero by 2050. On the basis that new homes built now and in the next 5 to 10 years will exist in 2050, these homes should be future proofed with low carbon heating and world-leading levels of energy efficiency. The approach has been set out in the Future Homes Standard which proposes a ban on fossil fuel heating systems in new homes by 2025 and includes views on how building regulations can reduce the carbon footprint of new homes. These changes would significantly change the utility requirements for new housing projects, with gas potentially eliminated as a core utility, but with enhanced electricity requirements. TriConnex is working with its customers on how these changes will impact current and proposed projects and identifying the right solutions to support this.

Growth strategy

TriConnex's growth ambitions are to build the business in a significant and sustainable manner, with the focus of the business continuing to be customer service. The growth drivers include:

Market penetration:

TriConnex has expanded from its original base in the South East into the South West and most recently into the Midlands, with a Leicester office opening in late 2018. Within these regions TriConnex has strong relationships with many regional businesses of existing blue-chip customers, however there are also regional businesses in these areas to whom TriConnex does not currently provide services. These businesses present a continued growth opportunity for TriConnex

Customer diversification:

TriConnex's customer base is currently residential housebuilders. The focus had previously been the larger residential housebuilders, and TriConnex is now developing relationships with small and mid-sized private development residential housebuilders as well as providers of affordable housing. The business has also recently started to engage the main contractor segment of the market as a means of accessing larger private rented and affordable schemes.

Service innovation:

TriConnex began in 2011 offering the design, installation and connection of gas and electricity networks. The installation of water networks was introduced in 2014 and fibre in 2016. Service enhancements currently being introduced include extending the number of fibre network providers housebuilders can connect to and the incorporation of electric vehicle charging units within housing developments.

Outlook

The proportion of regulated utility connections to be made by independents providers is expected to continue to increase. TriConnex has already built a strong reputation of providing a high level of customer service alongside cost effective, efficient connections. The fundamental market growth drivers for our business are positive, which, with our continuing strong order book, means that our business is well positioned to deliver further growth.

eSmart Networks

Financial and operating performance

In it's first full year of trading, eSmart Networks has completed a variety of installations, including single charging units at destination sites such as supermarkets and petrol station forecourts, ultra-high-powered 'charging stations' and complex multi-point fleet charging with integrated battery storage. Revenue for the year totalled £2.1m (2018: £0.3m), as the business continues to scale up in parallel to the growing pace of the EV charging infrastructure sector.

As the business has continued to grow through the year, project efficiencies are being achieved with gross margins for the year being recorded at 23.4% (2018: negative 14.5%), with gross profits totalling £0.5m (2018: loss £0.04m)

Our investment in the sector has been measured with a tight control on expenditure, with administrative expenses growing by £0.3m to £1.1m (2018: £0.8m), with the headcount increasing to 24 by the year end (2018: headcount 9), although eSmart Networks utilises skilled resources from across the group in addition to the direct head count. The operating loss for the year was £0.6m (2018: loss £0.7m).

The order book at 30 September 2019 has increased £1.7m year-on-year to £2.5m (2018: £0.8m).

Our markets

The UK, through the 2008 Climate Change Act, has a long-term, legally binding commitment to tackling climate change. In June 2019 the UK became the first major economy to write into law a commitment to bring all greenhouse gas emissions to net zero by 2050, compared to the previous target of at least 80% reduction from 1990 levels. Transport generates approximately a quarter of all the UK's greenhouse gas emissions, therefore, to achieve the legally binding reduction target for the UK, emissions generated from transport need to be extensively reduced.

In July 2018, the UK Government published the Road to Zero Strategy. This places electric vehicles at the heart of the transition to a lower emission transportation system as well as recognising the need for large-scale infrastructure investment to support this transition. In September 2019 the Government announced details of the initial of £70m (from a total £400m fund) to install 3,000 rapid charge points by 2024.

Recent studies suggest that the UK will require more than 22.2m electric vehicle charging points by 2050 in order for the UK to achieve the net zero emission target, with 2.6m in public places with the balance as private charging point for houses with off street parking at an overall estimated installation cost of £50bn.

eSmart Networks has been created by Nexus to support the UK's transition to a lower-carbon transportation system. A new and valuable market is rapidly emerging, and by applying the electrical expertise within TriConnex, coupled with the civil engineering capability in Tamdown, eSmart Networks is perfectly placed to design and install the electric vehicle charging infrastructure required in the UK. Whilst only operating for a relatively short period, eSmart Networks has already created a leading reputation for delivering infrastructure solutions across a number of key market segments.

Growth strategy

eSmart Networks' growth ambitions are to build the business in a significant and sustainable manner. The growth drivers include:

Product and Service expansion:

To date eSmart Networks has designed and installed charging units at destination sites, such as supermarkets and pubs, en-route charging points at or near petrol forecourts and complex multi-point fleet charging solutions with integrated battery storage. Utilising this experience, the business will expand the service offering to businesses with fleets of vehicles, workplace charging and continue to expand the diversity of destination sites.

In conjunction with the design and installation of electric vehicle charge points, the business is building its capabilities as an Independent Connections Provider for the Industrial and Commercial sector with a particular focus on renewable energy sources and energy storage.

Geographic expansion:

eSmart Networks was set up in 2017 to be a national business and during 2019 eSmart Networks has successfully designed and installed charging units, from single charge points to ultra-high-powered charging stations, in each of the nations of Great Britain. The business is well placed to take advantage of the significant investment in charging infrastructure throughout the United Kingdom that is being made by private funds, car manufacturers and Government.

Outlook

There is a substantial need to deliver the charging infrastructure to underpin the UK's transition to an electrified fleet. 2018/2019 has seen both large Government stimulus (such as the £400m 'Charging Infrastructure Fund') as well a private capital deployed without government subsidy to roll out large scale infrastructure projects. eSmart Networks has been selected by customers such as IONITY (a private partnership between BWW, Ford, Daimler and VW Group) who are rolling out pan national high-powered charging solutions, requiring extensive electrical and civil engineering infrastructure.

The Board believes that the macro-environmental factors (legal net zero target, large government finance commitment, growing awareness of carbon emissions and reducing ownership cost of EVs) will drive significant transformation to an electrified transport system. In parallel to this, a significant reduction in the use of natural gas will be required, requiring large and complex investments in the national electricity networks. eSmart Networks is perfectly positioned to provide the critical grid connection and installation services for the EV transition and support the wider electrification of the transport networks.

Consolidated statement of comprehensive income

For the year ended 30 September 2019

	Note	2019	2018
		£'000	£'000
Revenue		155,103	134,938
Cost of sales		(127,178)	(107,296)
Gross profit		27,925	27,642
Administrative expenses		(21,940)	(18,210)
Operating profit		5,985	9,432
Finance income	5	59	29
Finance expense	5	(339)	(249)
Profit before tax		5,705	9,212
Taxation	6	(1,530)	(1,918)
Profit and total comprehensive income for the year attributable to equity holders of the parent		4,175	7,294
Earnings per share (p per share)
Basic	8	10.95	19.14
Diluted	8	10.63	18.85
Consolidated statement of financial position As at 30 September 2019 2019 2018 £'000 £'000 Non-current assets Property, plant and equipment 6,992 6,853 Right of use assets 4,845 - Goodwill 2,361 2,361 Other investments 43 47 Deferred tax asset - 7 Total non-current assets 14,241 9,268 Current assets Inventories 378 29 Trade and other receivables 40,922 35,002 Contract assets 11,986 10,712 Cash and cash equivalents 27,366 26,414 Total current assets 80,652 72,157 Total assets 94,893 81,425 Current liabilities Borrowings 2,000 2,000 Trade and other payables 39,392 33,524 Contract liabilities 22,572 18,643 Lease liabilities 1,461 430 Corporation tax 164 461 Total current liabilities 65,589 55,058 Non-current liabilities Borrowings 2,745 4,400 Lease liabilities 3,136 156 Deferred tax liabilities 152 - Total non-current liabilities 6,033 4,556 Total liabilities 71,622 59,614 Net assets 23,271 21,811 Equity attributable to equity holders of the Company Share capital 762 762 Retained earnings 22,509 21,049 Total equity 23,271 21,811

Consolidated statement of changes in equity

For the year ended 30 September 2019

	Share capital	Retained earnings	Total
	£'000	£'000	£'000
Equity as at 1 October 2017	762	16,251	17,013
Transactions with owners
Dividend paid	-	(2,439)	(2,439)
Share-based payments	-	(57)	(57)
	-	(2,496)	(2,496)
Total comprehensive income
Profit and total comprehensive for the year	-	7,294	7,294
	-	7,294	7,294
Equity as at 30 September 2018	762	21,049	21,811
Opening IFRS 15 adjustment	-	(787)	(787)
Revised equity at 30 September 2018	762	20,262	21,024
Transactions with owners
Dividend paid	-	(2,515)	(2,515)
Share-based payments	-	587	587
	-	(1,928)	(1,928)
Total comprehensive income
Profit and total comprehensive for the year	-	4,175	4,175
	-	4,175	4,175
Equity as at 30 September 2019	762	22,509	23,271

Consolidated statement of cash flows

For the year ended 30 September 2019

	Note	2019	2018
		£'000	£'000
Cash flow from operating activities
Profit before tax		5,705	9,212
Adjusted by:
Profit on disposal of property, plant and equipment - owned		(40)	(119)
Loss on disposal of property, plant and equipment - right of use		6	-
Share-based payments		587	(57)
Finance expense (net)		280	220
Depreciation of property, plant and equipment - owned		686	1,336
Depreciation of property, plant and equipment- right of use		1,504	-
Operating profit before working capital changes		8,728	10,592
Working capital adjustments:
Increase in trade and other receivables		(8,111)	(4,779)
Increase in inventories		(349)	(2,393)
Increase in trade and other payables		9,927	3,107
Cash generated from operating activities		10,195	6,527
Interest paid		(339)	(249)
Taxation paid		(1,667)	(1,564)
Net cash flows generated from operating activities		8,189	4,714
Cash flow from investing activities
Purchase of property, plant and equipment - owned		(2,071)	(815)
Proceeds from disposal of property, plant and equipment - owned		665	540
Proceeds from disposal of property, plant and equipment - right of use		50	-
Proceeds from disposal of assets measured at FVOCI		4	8
Interest received		59	29
Net cash used in investing activities		(1,293)	(238)
Cash flow from financing activities
Dividend payment	6	(2,515)	(2,439)
Drawdown of term loan		345	-
Repayment of loans		(2,000)	(2,000)
Principal elements of lease repayments		(1,774)	(689)
Net cash used in financing activities		(5,944)	(5,128)
Net change in cash and cash equivalents		952	(652)
Cash and cash equivalents at the beginning of the year		26,414	27,066
Cash and cash equivalents at the end of the year		27,366	26,414

1. Accounting policies

The results for the year ended 30 September 2019 are unaudited. The financial information set out above does not constitute the Company's financial statements for the year ended 30 September 2018 but is derived from those statements. Financial statements for 2018 have been delivered to the Registrar of Companies. The auditor has reported on the 2018 statements; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) Companies Act 2006 or equivalent preceding legislation.

While the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, this announcement itself does not contain sufficient information to comply with IFRS.

The accounting policies used to prepare these preliminary results are the same as those used in the preparation of the Group's audited accounts for the year ended 30 September 2018, except for those outlined in note 2.

The Directors have undertaken a future cash flow analysis and as a result have a reasonable expectation that the Group has adequate resources to meet its liabilities as they arise for at least 12 months, consequently, the Directors have adopted the going concern basis of accounting in the preparation of this report.

2. Change of accounting policies

The following standards have been adopted by the Group during the current reporting period:

· IFRS 9: Financial Instruments

· IFRS 15: Revenue from Contracts with Customers

· IFRS 16: Leases

IFRS 9: Financial Instruments

IFRS 9 addresses the classification, measurement and recognition of financial assets and liabilities, and some contracts to buy or sell non-financial items. This standard replaces IAS 39: Financial Instruments: Recognition and Measurement. IFRS 9 became effective for accounting periods beginning on or after 1 January 2018 and the Group adopted IFRS 9 on 1 October 2018.

The most significant area of change which could potentially impact the Group's reported results is the introduction of an 'expected credit loss' model. This model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses, as is the case under IAS 39. The Group's trade receivables are the main asset that are subject to IFRS 9's expected credit loss model and based on an assessment of historic credit losses on the Group's financial assets and the likelihood of the occurrence of future credit losses, the Directors consider there to be no significant change to the way the Group accounts for impairments. There has been no impact on the financial statements from the implementation of IFRS 9.

The classification and measurement of financial liabilities remains unchanged from IAS 39. Under IFRS 9, a financial asset is now classified on initial recognition as measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss. Applying this classification to the Group's financial assets does not result in changes to the accounting.

As a result of adopting IFRS 9, the accounting policy for financial instruments at 30 September 2018 is replaced with the following with effect from 1 October 2018:

Financial Instruments

The Group classifies its financial assets in the following three measurement categories based on the way the asset is managed and its contractual cash flow characteristics:

Amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost.

Fair value through other comprehensive income

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest are measured at fair value through other comprehensive income ('FVOCI').

Fair value through profit or loss

Assets that do not meet the criteria of amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss.

The Group's principal financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables and interest-bearing borrowings. Based on the way these financial instruments are being managed, and their contractual cash flow characteristics, all the Group's financial instruments are measured at amortised cost.

IFRS 15: Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. This standard replaces IAS 18: Revenue, IAS 11: Construction Contracts and related interpretations. IFRS 15 became effective for accounting periods beginning on or after 1 January 2018 and the Group adopted IFRS 15 on 1 October 2018 using the modified retrospective transition approach. Comparatives have not been restated, as permitted under the specific transitional provisions in the standard.

A small number of TriConnex contracts were identified which, under IAS 11, allowed the revenue to be recognised in a number of distinct phases. This has resulted in £789,000 of earnings being recognised earlier than allowed under IFRS 15. An opening statement of financial position adjustment on 1 October 2018 has decreased retained earnings by £787,000, decreased assets by £915,000 and increased liabilities by £128,000. Under IFRS 15 such profits will be recognised in future periods.

As a result of changes to the size and type of contract being secured by eSmart Networks Limited, the Group has reviewed its position in relation to IFRS 15 and the revenue to be recognised on contracts relating to electric vehicle and smart grid infrastructure. The effect of the reassessment is that revenue on these contracts will be recognised over time as this will better depict the terms of the underlying agreement.

As a result of adopting IFRS 15, the accounting policy for construction contracts, design, installation and connection of utility networks and electric vehicle and smart grid infrastructure at 30 September 2018 is replaced with the following with effect from 1 October 2018:

Revenue recognition

Revenue, which excludes intra-group revenue and value added tax, comprises:

· Contract revenue from construction contracts;

· contract revenue from the design, installation and connection of utility networks; and

· contract revenue from electric vehicle and smart grid infrastructure.

In line with IFRS 15 the Group recognises revenue based on the application of the standards principle-based 'five step' model to the Groups contracts with customers.

Construction contracts - Tamdown

The performance obligations and transaction price are determined within contracts between the customer and the Company. Each contract has one performance obligation, the provision of specific construction activities for both residential and commercial developments. Contract modifications are added to existing contracts where they are extensions to the original contracts. There are no variable consideration elements attached to any of the contracts. The revenue is recognised over time as the Company's performance of its obligations creates or enhances an asset that the customer controls. Payment of the transaction price is typically due in a number of stage payments throughout the contract.

Design, installation and connection of utility networks - TriConnex

The performance obligations and transaction price are determined within contracts between the customer and the Company. Each contract has one performance obligation, the provision of utility connections. Contract modifications are added to existing contracts where they are extensions to the original contracts. There are no variable consideration elements attached to any of the contracts. The revenue is recognised over time as the Company's performance of its obligations creates or enhances an asset that the customer controls. Payment of the transaction price is typically due in a number of stage payments throughout the contract.

Electric vehicle and smart grid infrastructure - eSmart Networks

The performance obligation and transaction price are determined within contracts between the customer and the Company. Each contract has one performance obligation, the provision of charging infrastructure. Contract modifications are added to existing contracts where they are extensions to the original contracts. There are no variable consideration elements attached to any of the contracts. The revenue is recognised over time as the Company's performance of its obligations creates or enhances an asset that the customer controls. Payment of the transaction price is typically due in a number of stage payments throughout the contract.

Transversal policies applicable to all of the three companies above

Revenue is recognised over the period of the contract by reference to the stage of completion. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each.

Contract costs are recognised as expenses when incurred. When it is probable that total costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

'Contract assets' (as discussed in IFRS 15.107) are recognised when the Group performs by transferring goods or services to a customer before customer pays consideration or before payment is due. This asset is assessed for impairment in accordance with IFRS 9.

'Contract liabilities' (as discussed in IFRS 15.106) are recognised if a customer pays consideration before the entity transfers a good or service.

IFRS 16: Leases

IFRS 16 addresses the definition of a lease, recognition and measurement of leases, and it establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will now be accounted for on the statement of financial position for lessees. This standard replaces IAS 17: Leases and related interpretations. IFRS 16 is effective for accounting periods beginning on or after 1 January 2019, earlier adoption is permitted subject to EU endorsement and the entity adopting IFRS 15, at the same time. The Group adopted IFRS 16 on October 2018 in line with IFRS 15 using the modified retrospective transition approach. Comparatives have not been restated, as permitted under the specific transitional provisions in the standard.

On adoption of IFRS 16, the Group recognised right of use assets and lease liabilities in relation to leases which had previously been classified as operating leases under the principles of IAS 17. The liabilities were measured at the present value of the remaining lease payments, discounted using the Company's incremental borrowing rate in cases where the interest rate implicit in the lease cannot be determined. An opening balance adjustment on 1 October 2018 has increased both assets and liabilities by £1,892,000, the net impact is nil.

The opening balance adjustment was calculated as shown below:

	£'000
Lease commitments relating to:
Office accommodation	1,063
Motor vehicles	1,284
Office equipment	83
Discounted using the lessee's incremental borrowing rate at the date of initial application	2,247
(Less): short-term leases recognised on a straight-line basis as expense	339
(Less): low-value leases recognised on a straight-line basis as expense	16
Lease liability recognised at 1 October 2018	1,892
Of which are:
Current lease liabilities	564
Non-current lease liabilities	1,328
	1,892

In applying IFRS 16 for the first time, the Group has applied the following practical expedients permitted by the standard:

· the use of a single discount rate to a portfolio of leases with similar characteristics;

· not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease;

· the accounting of operating leases with a remaining lease term of less than 12 months as at 1 October 2018 as short-term leases;

· the exclusion of initial direct costs for the measurement of the right of use assets at the date of initial application; and

· the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group leases various offices, land, office equipment and motor vehicles. Rental periods are typically made for fixed periods but may have extension options. The lease agreements do not impose any covenants.

Up until 30 September 2018, the leases mentioned above were classified as operating leases. Payments made under operating leases were charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. From 1 October 2019, leases are recognised as a right of use asset with a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the consolidated statement of comprehensive income over the lease period. The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

· fixed payments (including in-substance fixed payments), less any lease incentives receivable;

· variable lease payments that are based on an index or a rate;

· amounts expected to be payable by the lessee under residual value guarantees;

· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

· payments and penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the consolidated statement of comprehensive income.

3. Revenue

On 1 October 2018, the Group adopted IFRS 15: Revenue from Contracts with Customers as described in note 2. Comparatives have not been restated as permitted in the standard. Details of prior year revenue can be found in note 4.

Revenues from external customers are generated from the supply of services relating to construction contracts, design, installation and connection of utility networks and electric vehicle and smart grid infrastructure. Revenue is recognised over time in the following operating divisions:

	2019	2019	2019	2019
	Tamdown	TriConnex	eSmart Networks	Total
	£'000	£'000	£'000	£'000
Segment revenue	112,228	41,798	2,108	156,134
Inter-segment revenue	(1,031)	-	-	(1,031)
Revenue from external customers	111,197	41,798	2,108	155,103
Timing of revenue recognition
Over time	111,197	41,798	2,108	155,103
Client type
Residential	110,615	41,798	-	152,413
Non residential	582	-	2,108	2,690
	111,197	41,798	2,108	155,103

Inter-segment revenues are earned on an arm's length basis.

4. Segmental analysis

The Group is organised into the following three operating divisions under the control of the Executive Board, which is identified as the Chief Operating Decision Maker as defined under IFRS8 'Operating Segments':

· Tamdown

· TriConnex

· eSmart Networks

All of the Group's operations are carried out entirely within the United Kingdom.

Segment information about the Group's operations is presented below:

		2019	2018
	Note	£'000	£'000
Revenue
Tamdown		112,228	102,452
TriConnex		41,798	32,211
eSmart Networks		2,108	275
Inter company trading		(1,031)	-
Total revenue		155,103	134,938
Gross profit
Tamdown		14,547	17,239
TriConnex		12,885	10,443
eSmart Networks		493	(40)
Total gross profit		27,925	27,642
Operating profit
Tamdown		4,033	8,018
TriConnex		4,319	3,742
eSmart Networks		(621)	(723)
Group administrative expenses		(1,746)	(1,605)
Total operating profit		5,985	9,432
Net finance cost	5	(280)	(220)
Profit before tax		5,705	9,212
Taxation	6	(1,530)	(1,918)
Total comprehensive income for the period		4,175	7,294

5. Finance income and expense

	2019	2018
	£'000	£'000
Finance income
Interest on bank deposits	59	29
Finance expense
Interest on bank loan	(199)	(213)
Interest on lease liabilities	(140)	(36)
	(339)	(249)
Finance expense (net)	(280)	(220)

6. Taxation

	2019	2018
	£'000	£'000
Current Tax:
UK corporation tax on profits for the year	1,004	1,898
Adjustment in respect of prior periods	(56)	89
Exceptional adjustment in respect of prior periods	422	-
Total current tax	1,370	1,987
Deferred Tax:
Origination and reversal of timing differences	297	(54)
Adjustment in respect of prior periods	(137)	(15)
Total tax charge	1,530	1,918

The tax assessed for the year is different from the standard rate of corporation tax as applied in the UK. The differences are explained below:

Profit before tax	5,705	9,212
Profit before tax multiplied by the respective standard rate of corporation tax applicable in the UK (19.0%) (2018: 19.0%)	1,084	1,750
Effects of:
Fixed asset differences	626	27
Non-deductible expenses	168	61
Income not taxable for tax purposes	(150)	-
Other tax adjustments, reliefs and transfers	(560)	-
Adjustment in respect of prior periods - current tax	(56)	89
Exceptional adjustment in respect of prior periods	422	-
Adjustment in respect of prior periods - deferred tax	(137)	(15)
Deferred tax	133	6
Total tax charge	1,530	1,918

The tax charge for the period included an exceptional adjustment in respect of prior periods. The exceptional item has been recorded as the tax charge relating to 2016 and previous years has been found to be understated. The understatement is not material in any year to which it relates or in total but has been considered exceptional due to its nature.

7. Dividends

	2019	2018
	£'000	£'000
Amounts recognised as distributions to equity holders in the year:
Interim dividend for the year ended 30 September 2019 of 2.2p (2018: 2.2p) per share	838	838
Final dividend for the year ended 30 September 2018 of 4.4p (2017: 4.2p) per share	1,677	1,601
	2,515	2,439

The proposed final dividend for the year ended 30 September 2019 of 4.4p per share (2018: 4.4p per share) makes a total dividend for the year of 6.6p (2018: 6.6p). The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial statements. The total estimated dividend to be paid is £1,677,000.

8. Earnings per share

	2019	2018
	£'000	£'000
Profit for the year attributable to equity shareholders	4,175	7,294
Weighted average number of shares in issue for the year	38,117,850	38,117,850
Effect of dilutive potential ordinary shares:
Share options	1,170,294	576,617
Weighted average number of shares for the purpose of diluted earnings per share	39,288,144	38,694,467
Basic earnings (pence per share)	10.95	19.14
Diluted earnings (pence per share)	10.63	18.85