Final Results

RNS Number : 4671U

Northern Bear Plc

25 June 2009

 



Northern Bear PLC

('Northern Bear' or the Company)

Preliminary results for the year ended 31st March 2009

Highlights 

• Revenue increased by 30% to £42m (2008: £32m) and pre-tax profit increased by 27% to £2.9m (2008: £2.3m).
• Earnings per share increased by 12% to 11.5 pence (2008: 10.3 pence).
• The Group continues to be very cash generative, reporting a cash flow from operations of £2.0m (2008: £0.4m).
• Renegotiation of improved banking terms. Committed facilities of £11.0m, of which £9.3m was utilised at the year end.  
  
  

Graham Forrest, CEO of Northern Bear, commented: 

'Whilst the past twelve months have been challenging, I am delighted that we have been able to produce a very robust set of results, demonstrating the underlying strength of our business model.

Since the year end, we have experienced an encouraging upturn in the levels of demand in some of our businesses. Furthermore, we are confident that opportunities will arise and that we are well placed to capitalise on these.'  

For further information please contact:

Graham Forrest, Northern Bear - 0776 4963751

James Harris / James Spinney, Strand Partners - 0207 409 3494

Nick Rome, Bishopsgate Communications - 0207 562 3366

Chairman's statement

Introduction

I am delighted to announce that Northern Bear has delivered another year of earnings growth despite the current unprecedented economic conditions.

Income has grown by 30% to £41.8 million and profit before tax by 27% to £2.9 million. Earnings per share has grown by 12% to 11.5 pence per share and interest cover remains healthy at 4.8 times.

The Group continues to be very cash generative, reporting a cash flow from operations of £2.0 million (2008: £0.4m).

These results clearly demonstrate the robust nature and sound defensive qualities of our diversified business model.  

We have also recently renegotiated and improved our banking terms, which underlines the confidence our funders share with the management team. We have committed bank facilities of £11.0 million, having regard to capital repayments already made, of which £9.3 million was utilised at the year end. This gives us additional flexibility and provides a platform to take advantage of opportunities as they arise.

Strategy and business review

Our strategy of acquiring mature, cash generative, owner managed businesses and to integrate this with the organic growth of our existing Group businesses, remains unchanged.  While we have not completed an acquisition for over 12 months, this still remains a key part of our strategy. We continue to look for quality, owner managed businesses with strong, second tier management to complement our existing 13 operations.

On 13th November 2008, we announced the opening of Jennings Roofing Manchester, a sister roofing business to the original business based in Leeds and are delighted at the progress made by this business.

During the period, all of our businesses operated in specific markets that each experienced their own particular challenges. Despite this, many of our businesses have enjoyed strong trading performances, and in some cases, record profitability. These businesses include those in specialist sectors, such as fire protection, asbestos removal and equipment rental. Their performance has helped balance the pressures experienced by some of our other businesses, particularly those with some exposure to the new house build sector. To their enormous credit, those businesses with links to the new house build sector continued to contribute to Group profitability. Given the current tough market environment, this is testament to the quality of our management and the strength of the customer relationships built up over the years. 

We continue to win new customers and source new markets, which is partly a result of new members of our team joining us from competitors. 

During the period we have actively managed our cost base. Its flexibility allows our individual businesses to minimise the risk of a period of losses. We have found that management have not been afraid, nor slow, to make the tough decisions needed in such uncertain times.

At Group level, there have also been substantial cost saving measures implemented. These include a Group wide pay freeze, cessation of non-contractual cash bonuses, a capital expenditure review, material marketing and entertaining reduction and renegotiation of advisors' fees. Such measures are ongoing as the Board consider it their priority to reduce expenditure wherever possible, while continuing to explore every avenue for new work and opportunities.

Dividend

Given the ongoing uncertainty in the market, and the obvious need for prudence, the priority for the Board is to conserve cash resources and to continue to repay debt. While our strong cash flow and profitability would have supported a final dividend, we have taken the decision to suspend such a payment. However, should trading continue to improve, we will reinstate our dividend policy at the earliest point at which it is responsible to do so.

Board of Directors / advisors

We were delighted to welcome two new directors to the Board during the year. On 8th April 2008, Graham Jennings joined the Board as an Operations Director, in line with our policy of appointing executive directors, wherever possible, from within the existing Group operating businesses and Ian McLean joined the Board on 14 November 2008 as a non-executive director. 

Marcus Yeoman and Jon Pither, two of the Company's directors since flotation, retired from the Board on 30 June 2008 and 21 October 2008 respectively. Jon Pither was the Company's co-founder and was instrumental in its development and flotation.  We thank him for his substantial contribution to the growth of the Company.

The Company's retained broker, St Helen's Capital, has agreed to stand down. The Company's NOMAD, Strand Partners Limited, will assume their role with immediate effect.

Outlook

While the environment continues to be challenging, I am very confident that our executive team will continue to deliver success in the future.

The strength of our businesses is dependent on the quality of our long-term relationships and partnering agreements with the main contractors and blue chip builders involved in both public and private client contracts.  The Northern Bear brand continues to strengthen as trade grows with this customer base.

Our strategy of repositioning the businesses away from new house build, which now accounts for only 4% of Group turnover (2008: 13%) was taken at a very early stage in the cycle and has helped insulate us from the severe downturn in that sector. We are very mindful however, of maintaining a spread of businesses and consider it essential to retain a presence in the new house build sector for when the inevitable upturn arrives.  We are already experiencing a slight upturn in our new house build businesses, even though a degree of pricing pressure remains.

With regard to any future acquisitions, it is our intention to fund these with a combination of vendor equity and from the Company's own resources, rather than as previously using vendor equity and bank debt. 

We believe that this approach will both help maintain our solid financial base and continue our growth, ensuring we do not jeopardise what we have achieved over the past two and half years.  Together with the strong defensive qualities of our business, this will ensure we are best positioned to survive the tough times and prosper and flourish in the good times. 

We have proved that our businesses are able to continue to deliver real profits and cash generation in the toughest of trading environments. Opportunities will present themselves over the coming months and I believe we are well placed to capitalise upon these as we emerge from the current downturn.

People

Since becoming Chairman in October 2008, I have been continually impressed by the skill, enthusiasm and expertise of our management. These qualities, above all else, are our greatest assets and give me confidence for the coming year. I would like to thank all of our employees across the group for their contribution to our excellent results.

Howard Gold
Chairman

Consolidated income statement

for the year ended 31 March 2009 (unaudited)

		Note	2009		2008
			£000	£000	£000	£000
Revenue				41,758		32,241
Cost of sales				(29,609)		(22,777)
Gross profit				12,149		9,464
Other operating income				27		46
Administrative expenses
Exceptional expenses			(129)		-
Share based payments			(91)		(196)
Other expenses			(8,339)		(6,106)
				(8,559)		(6,302)
Operating profit				3,617		3,208
Finance income				25		64
Finance expenses
Finance expense			(785)		(613)
Exceptional expense			-		(407)
				(785)		(1,020)
Profit before income tax				2,857		2,252
Income tax expense				(685)		(694)
Profit for the period				2,172		1,558
Basic earnings per share		4		11.5p		10.3p
Diluted earnings per share		4		11.5p		9.4p

Consolidated statement of changes in equity

for the year ended 31 March 2009 (unaudited)

		2009		2008
		£000		£000
Profit for the period		2,172		1,558
Shares issued		1,819		6,556
Share based payments		91		196
Dividends		(564)		(169)
Net increase in total equity		3,518		8,141
Total equity at start of year		17,757		9,616
Total equity at end of year		21,275		17,757

Consolidated balance sheet

at 31 March 2009 (unaudited)    

			2009		2008
			£000		£000
Assets
Property, plant and equipment			3,705		2,177
Intangible assets			25,264		20,788
Other investments			11		11
Deferred tax assets			-		11
Total non-current assets			28,980		22,987
Inventories			929		311
Trade and other receivables			7,482		8,165
Prepayments for current assets			370		277
Cash and cash equivalents			750		714
Total current assets			9,531		9,467
Total assets			38,511		32,454
Equity
Share capital			190		170
Share premium			5,169		5,021
Reserves			12,586		10,935
Retained earnings			3,330		1,631
Total equity attributable to equity holders of the company			21,275		17,757
Liabilities
Loans and borrowings			4,671			3,400
Deferred tax liabilities			48			-
Total non-current liabilities			4,719			3,400
Bank overdraft			3,489			2,283
Loans and borrowings			1,881			1,501
Trade and other payables			6,241			6,044
Current tax payable			456			869
Deferred income			450			600
Total current liabilities			12,517			11,297
Total liabilities			17,236			14,697
Total equity and liabilities			38,511			32,454

Consolidated statement of cash flows

for the year ended 31 March 2009 (unaudited)

		2009		2008
		£000		£000
Cash flows from operating activities
Profit for the period		2,172		1,558
Adjustments for:
Depreciation		670		329
Finance income		(25)		(64)
Finance expense		785		1,020
(Profit)/loss on sale of property, plant and equipment		(4)		3
Equity settled share-based payment expenses		91		196
Income tax expense		685		694
		4,374		3,736
Change in inventories		(527)		135
Change in trade and other receivables		1,151		(1,273)
Change in prepayments		22		26
Change in trade and other payables		(723)		98
Change in deferred income		(150)		199
		4,147		2,921
Interest received		25		64
Interest paid		(785)		(1,020)
Tax paid		(1,352)		(1,555)
Net cash from operating activities		2,035		410
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		74		22
Acquisition of subsidiary, net of cash acquired		(4,072)		(5,535)
Acquisition of property, plant and equipment		(173)		(295)
Net cash from investing activities		(4,171)		(5,808)
Cash flows from financing activities
Proceeds from issue of share capital		-		3,906
Payment of transaction costs		-		(337)
Proceeds from new borrowings		3,500		4,500
Repayment of borrowings		(1,740)		(3,395)
Payment of finance lease liabilities		(230)		(74)
Dividends paid		(564)		(169)
Net cash from financing activities		966		4,431
Net decrease in cash and cash equivalents		(1,170)		(967)
Cash and cash equivalents at start of year		(1,569)		(602)
Cash and cash equivalents at end of year		(2,739)		(1,569)

Notes

(forming part of the financial statements)

1   Basis of preparation

The financial information set out above has been prepared in accordance with the recognition and measurement requirements of International financial Reporting Standards as adopted by the EU (Adopted IFRSs).

2   Status of financial information

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2009 or 2008.  The financial information for 2008 is derived from the statutory accounts for 2008, which have been delivered to the registrar of companies. The auditors have reported on the 2008 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2009 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

The current economic conditions create an uncertainty over demand for the Group's products and services but the Group forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is expected to have a sufficient level of financial resources available through cash and borrowings and therefore the directors believe that the Group is well placed to manage their business risk successfully despite the economic uncertainty.

3   Acquisitions

a)    On 2 April 2008 the company acquired 100% of the issued share capital of A1 Industrial Trucks Limited     and subsidiaries.      The resulting goodwill was calculated and capitalised as follows:

					Book value		Fair value adjustment		Fair Value
					£000		£000		£000
Fixed assets
Tangible					1,641		(72)		1,569
Current assets
Stock					37		-		37
Debtors					212		-		212
Cash					1,441		-		1,441
Current liabilities					(537)		-		(537)
Net assets					2,794		(72)		2,722
Goodwill					2,540		72		2,612
Purchase consideration					5,334		-		5,334
Satisfied by:
Cash									4,197
Shares									1,137
									5,334

b)    On 2 April 2008 the company acquired 100% of the issued share capital of DJ McGough Limited and     subsidiaries.  The resulting goodwill was calculated and capitalised as follows:

					Book value			Fair value adjustment		Fair Value
					£000			£000		£000
Fixed assets
Tangible					98			-		98
Current assets
Stock					264			(60)		204
Debtors					371			-		371
Cash					484			-		484
Current liabilities
Bank overdraft					(8)		-			(8)
Other liabilities					(397)		(304)			(701)
Net assets					812			(364)		448
Goodwill					1,500			364		1,864
Purchase consideration					2,312			-		2,312
Satisfied by:
Cash										1,792
Shares										520
										2,312

4    Earnings per share

The calculation of basic earnings per share was based on the profit for the period and on the weighted average number of ordinary shares outstanding, calculated as follows:

		2009			2008
Profit for the period (£000)		2,172		1,558
Weighted average number of ordinary shares ('000)		18,814		15,103
Earnings per share		11.5p		10.3p

The calculation of diluted earnings per share was based on the profit for the period and on the weighted average number of ordinary shares outstanding, after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

		2009		2008
Profit for the period (£000)		2,172		1,558
Weighted average number of ordinary shares ('000)		18,814		16,598
Earnings per share		11.5p		9.4p

5    Dividends

The following tables analyse dividends paid and the year to which they relate:

Dividend paid

				2009		2008
				Pence per share	£000	Pence per share	£000
2009 interim dividend				1.0	188	-	-
2008 final dividend				2.0	376	-	-
2008 interim dividend				-	-	1.0	169
					564		169

Dividend proposed at year end and not included as a liability in the accounts

				2009		2008
				Pence per share	£000	Pence per share	£000
2008 final dividend				-	-	2.0	376
					-		376

These preliminary results will be available on the Company's website www.northern-bear.com. Further copies can be obtained from the registered office at Unit 1 Station House Station Road Chester-le-Street County Durham DH3 3DU.

 

END

 

 

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