Interim Results

RNS Number : 2838E

Northern Bear Plc

17 December 2009

 



Northern Bear PLC

("Northern Bear" or "the Group")

Interim Results and Trading Update

Highlights

• Revenue £17.4m (2008: £23.4m)

• Operating profit* £1.0m (2008: £2.6m)

• Basic earnings per share 2.3p (2008 8.1p)

• Successful completion of revised banking terms

• 20 per cent reduction in overheads compared to same period last year

• Continued improvement in trading since the period end

*  Operating profit before share based payments, finance costs and exceptional items.

Graham Forrest, CEO commented:

"The period under review was probably the worst experienced in recent memory and it is hardly surprising that we saw a decrease in both revenue and profitability. We acted very quickly to substantially reduce overheads across

all of our activities and, since the period end, we have seen a marked improvement in trading.

"Our newly revised and improved banking terms have now been agreed and, with the implementation of new controls and financial systems, we are experiencing a substantial improvement in our working capital. I am proud of the defensive qualities demonstrated by the Group during this period, and I and the Board look forward to the future with cautious optimism."

Chairman's statement

Introduction

I am pleased to announce the unaudited interim results for the Group for the six months ended 30 September 2009.

The trading environment in which the Group operates has been very challenging over this period. It is testament to the robustness of the Group's business model, the quality and diversity of our trading businesses and the depth of experience in our management team that we have been able to weather the storm and remain profitable in such conditions.

All of our companies have successfully operated through the last severe recession in the early 1990's and this experience of managing through an economic downturn has been invaluable in meeting the challenges we currently face, as well as preparing for future economic recovery.

Group revenue in the period was £17.4 million (2008: £23.4 million), a fall of 26 per cent. The Group achieved an operating profit (before share based payments, finance costs and exceptional items) of £1.0 million (2008: £2.6 million) and a profit before tax (before exceptional items) of £0.7 million (2008: £2.1 million).

Basic earnings per share were 2.3p (2008: 8.1p) and diluted earnings per share were 2.3p (2008: 7.8p)

Board Changes

On 13 October 2009, it was announced that David Jay had stepped down as Finance Director but was to remain on the Board as a Non-Executive Director. David was replaced as Finance Director by Steve Roberts. Steve was previously a Non-Executive Director of the Company (and was the Finance Director at the time that Northern Bear's shares were admitted to trading on AIM). We are delighted that Steve has agreed to take this position, and we feel that his appointment injects new thinking to the Company at Board level, whilst ensuring continuity.

Business Review

Trading

The trading environment during the six months to 30 September 2009 was extremely challenging.

On 13 October 2009, we published a trading update with details of a number of new contracts awarded. I am delighted to be able to confirm that this improvement in activity has continued.

We do continue, however, to experience margin pressure, with the gross margin across the Group falling to 26.6 per cent, compared to 28.1 per cent in the second half of the previous financial year. The effects of this margin pressure have been mitigated by the actions taken to reduce overheads, which are some 20 per cent lower than in the first six months of the previous financial year. Such actions were taken at an early stage in the current recession and

included a Group-wide pay freeze, reductions in non-direct head count, a substantial reduction in marketing costs, the renegotiation of supplier rebates and professional fees, and a reduction in Directors' remuneration.

Cash Flows

Whilst the net debt position of the Group in the six months to September 2009 increased by £1.3 million, there has been a significant reduction in the two months since the period end. This is partly due to expected working capital movements, but has also been influenced by the stronger trading over the late summer and autumn months, which has now converted into cash. Added to this, the recently awarded contracts in the public sector have been negotiated on better payment terms than can ordinarily be achieved in the private sector.

In addition, our working capital management has been strengthened by new systems and controls initiated by Steve

Roberts and his team. Strong working capital management remains a cornerstone of our business.

Banking Terms

On 29 September 2009, we confirmed that discussions with the Group's bankers, to renegotiate the banking terms in existence at that time, were ongoing.

On 16 December 2009, we announced that those discussions had been successfully concluded.

This confirmation of continued support from our bank is tremendous news and confirms the resilient nature of our business model.

The agreement of new terms provides us with a solid financial foundation in these uncertain times.

Acquisitions

Acquisitions remain a key element of our growth strategy. We continue to look for quality businesses, which have strong management teams and sustainable earnings.

While it is now twenty months since our last acquisition, we are hopeful that we will be able to complete an acquisition in the coming months. Margins across our sector continue to be tight. Uncertainties relating to levels of future Government expenditure will, the Directors believe, result in depressed valuations being applied to businesses with exposure in these markets. Nevertheless, extreme caution will continue to be exercised by us in our acquisition process, and we will ensure that any businesses that the Group acquires exhibit the necessary qualities required to maintain future levels of profitability.

As previously stated, it is our intention to fund any future acquisitions from a combination of new equity and vendor equity, without reliance on bank funding. Furthermore, we would look to structure the consideration with a performance related element in order to ensure that we protect the Group from any shortfall in future profitability.

Dividend

While the recent upturn in trading conditions has been encouraging, the Directors consider they must continue to be prudent in the current financial climate. The Directors have therefore decided that there will be no interim dividend paid.

The Directors will however, review the level of future dividends in the light of the prevailing economic conditions and the performance of the business, with the intention of returning to the payment of dividends as soon as possible.

Outlook

The successful agreement and completion of new banking terms has provided us with a firm financial foundation allowing us to view the future with more confidence than at any time over the past eighteen months.

While the economic environment continues to be challenging, we have experienced a significant increase in activity in recent months and are cautiously optimistic that this upturn is sustainable.

Those of our businesses which operate in the new house build sector have shown an increase of 20 per cent in activity over the past three months, compared to the corresponding period last year.

The order book is currently strong, which in spite of continued margin pressure, allows us to enter the New Year with cautious optimism.

Our businesses have proved their strengths and defensive qualities in the challenging environment of the past eighteen months. I am confident that they will benefit from any further upturn in activity in the future.

Employees

I continue to be proud of, and impressed with, the resilience and loyalty of all of our employees during these difficult times, which have been the most challenging in recent memory. The positive approach of our staff has helped the Group's position and will continue to be the mainstay of the Group in the future.

The Interim Financial Report will be sent to shareholders in due course.

Howard Gold

Non Executive Chairman

17 December 2009

For further information please contact:

Northern Bear PLC

Graham Forrest - Chief Executive Officer [phone]

Strand Hanson Limited

James Harris / James Spinney [phone]

Hansard Group

Adam Reynolds [phone]

3

Condensed consolidated income statement

for the six month period ended 30 September 2009

	Note	Unaudited 6 months ended 30 September 2009	Unaudited 6 months ended 30 September 2008	Audited   Year ended    31 March 2009
		£000	£000	£000
Revenue Cost of sales		17,365 (12,746)	23,444 (16,445)	41,758 (29,609)
Gross profit		4,619	6,999	12.149
Other operating income		13	12	27
Administrative expenses		(3,759)	(4,502)	(8,559)
Exceptional expenses		(58)	-	(129)
Share based payments		(31)	(52)	(91)
Other administrative expenses		(3,670)	(4,450)	(8,339)
Results from operating activities		873	2,509	3,617
Finance income		-	20	25
Finance expenses		(262)	(406)	(785)
Profit before income tax		611	2,123	2,857
Income tax expense		(180)	(609)	(685)
Profit for the period		431	1,514	2,172
Basic earnings per share	4	2.3p	8.1p	11.5p
Diluted earnings per share	4	2.3p	7.8p	11.5p

Condensed consolidated statement of changes in equity

for the six month period ended 30 September 2009

	Share capital £000	Share premium £000		Merger reserve £000	Retained earnings £000		Total equity £000
At 1 April 2008	170	5,021		10,935	1,631		17,757
Total recognised income and expense	-	-		-	1,514		1,514
Issue of shares	18	-		-	-		18
Merger reserve arising on acquisition	-	-		1,654	-		1,654
Equity settled share based payment transactions	-	-		-	52		52
Dividends	-	-		-	(376)		(376)
At 30 September 2008	188	5,021		12,589	2,821		20,619
At 1 April 2008	170	5,021		10,935	1,631		17,757
Total recognised income and expense	-	-		-	2,172		2,172
Issue of shares	20	148		-	-		168
Merger reserve arising on acquisition	-	-		1,651	-		1,651
Equity settled share based payment transactions	-	-		-	91		91
Dividends	-	-		-	(564)		(564)
At 31 March 2009	190	5,169		12,586	3,330		21,275
At 1 April 2009	190	5,169		12,586	3,330		21,275
Total recognised income and expense	-	-		-	431		431
Equity settled share based payment transactions	-	-		-	31		31
At 30 September 2009	190	5,169		12,586	3,792		21,737

Condensed consolidated balance sheet

at 30 September 2009

		Unaudited 6 months ended 30 September 2009		Unaudited 6 months ended 30 September 2008			Audited  Year ended    31 March 2009
		£000		£000			£000
Assets Property, plant and equipment			3,422			3,955		3,705
Intangible assets			25,264			24,828		25,264
Other investments			11			11		11
Deferred tax assets			-			11		-
Total non-current assets			28,697			28,805		28,980
Inventories			1,000			810		929
Trade and other receivables			7,981			10,218		7,482
Prepayments for current assets			808			747		370
Cash and cash equivalents			358			292		750
Total current assets			10,147			12,067		9,531
Total assets			38,844			40,872		38,511
Equity Share capital			190			188		190
Share premium			5,169			5,021		5,169
Reserves			12,586			12,589		12,586
Retained earnings			3,792			2,821		3,330
Total equity attributable to equity holders of the company			21,737			20,619		21,275
Liabilities Loans and borrowings			4,593			5,485		4,671
Deferred tax liabilities			56			-		48
Total non-current liabilities			4,649			5,485		4,719
Bank overdraft			4,904			3,390		3,489
Loans and borrowings			1,419			1,994		1,881
Trade and other payables			5,606			7,318		6,241
Current tax payable			379			1,566		456
Deferred consideration			150			500		450
Total current liabilities			12,458			14,768		12,517
Total liabilities			17,107			20,253		17,236
Total equity and liabilities			38,844			40,872		38,511
								6

Condensed consolidated statement of cash flows

for the six month period ended 30 September 2009

		Unaudited 6 months ended 30 September 2009		Unaudited 6 months ended 30 September 2008			Audited   Year ended    31 March 2009
		£000		£000			£000
Cash flows from operating activities Profit for the period			431			1,514		2,172
Adjustments for: Depreciation			297			332		670
Finance income			-			(20)		(25)
Finance expense			262			406		785
Loss on sale of property, plant and equipment			16			4		(4)
Equity settled share-based payment transactions			31			52		91
Income tax expense			180			609		685
			1,217			2,897		4,374
Change in inventories			24			(198)		(527)
Change in trade and other receivables			(499)			(1,585)		1,151
Change in prepayments			(438)			(355)		22
Change in trade and other payables			(635)			651		(723)
Change in deferred consideration			(300)			(100)		(150)
			(631)			1,310		4,147
Interest received			-			20		25
Interest paid			(262)			(406)		(785)
Tax paid			(249)			(225)		(1,352)
Net cash from operating activities			(1,142)			699		2,035
Cash flows from investing activities Proceeds from sale of property, plant and equipment			-			145		74
Acquisition of subsidiary, net of cash acquired			-			(4,057)		(4,072)
Acquisition of property, plant and equipment			(17)			(335)		(173)
Net cash from investing activities			(17)			(4,247)		(4,171)
Cash flows from financing activities Proceeds from new borrowings			-			3,500		3,500
Repayment of borrowings			(532)			(988)		(1,740)
Payment of finance lease liabilities			(116)			(117)		(230)
Dividends paid			-			(376)		(564)
Net cash from financing activities			(648)			2,019		966
Net decrease in cash and cash equivalents			(1,807)			(1,529)		(1,170)
Cash and cash equivalents at start of period			(2,739)			(1,569)		(1,569)
Cash and cash equivalents at end of period			(4,546)			(3,098)		(2,739)

Notes

(forming part of the financial statements)

1    Basis of preparation

These condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'

as adopted by the EU. They do not include all the information required for the full annual financial statements, and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 March

2009.

These condensed financial statements are unaudited and were approved by the Board of Directors on 17 December 2009.

The information for the year ended 31 March 2009 does not constitute statutory financial statements as delivered by Section 240 of the Companies Act 1985. Those financial statements have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under Section 237 (2) or (3) or the Companies Act 1985.

The accounting policies applied in preparing these condensed financial statements are the same as those applied in the preparation of the annual financial statements for the year ended 31 March 2009, other than as disclosed in note 2.

2    Changes in accounting policies

From 1 April 2009 the following standards, amendments and interpretations became effective and were adopted by the Group:

• IFRS 8: Operating segments

• Amendments to IAS 23: Borrowing costs

• Amendments to IAS 1: Presentation of financial statements

The adoption of the above has not had a significant impact on the Group's profit for the period or equity.

3    Operating segment

The Board has reviewed the requirements of IFRS 8 'Operating Segments', including consideration of what results it reviews regularly to assess performance and make decisions about how resources are allocated. The Board has concluded that, as under IAS 14, the Group has one operating and reporting segment.8

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:

Unaudited 6 months ended 30 September 2009

Unaudited 6 months ended 30 September 2008

Audited Year ended 31 March 2009

Profit for the period (£000)	431		1,514		2,172
Weighted average number of ordinary shares ('000)	18,967		18,709		18,814
Basic earnings per share	2.3p		8.1p		11.5p

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:

Unaudited 6 months ended 30 September 2009

Unaudited 6 months ended 30 September 2008

Audited Year ended 31 March 2009

Profit for the period (£000)	431		1,514		2,172
Weighted average number of ordinary shares ('000)	18,967		19,393		18,814
Diluted earnings per share	2.3p		7.8p		11.5p

5    Dividends

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

Dividend declared	Unaudited 6 months ended 30 September 2009	Unaudited 6 months ended 30 September 2008	Audited Year ended 31 March 2009
	Pence per share	Pence per share	Pence per share
2008 interim dividend	-	-	-
2008 final dividend	-	2.0p	2.0p
2009 interim dividend	-	-	1.0p
	-	2.0p	3.0p
Total dividend payable	Unaudited 6 months ended 30 September 2009	Unaudited 6 months ended 30 September 2008	Audited Year ended 31 March 2009
	£000	£000	£000
2008 interim dividend	-	-	-
2008 final dividend	-	376	376
2009 interim dividend	-	-	188
	-	376	564
Dividend proposed at period end and not included as a liability in the accounts	Unaudited 6 months ended 30 September 2009	Unaudited 6 months ended 30 September 2008	Audited Year ended 31 March 2009
	£000	£000	£000
2008 interim dividend (1.0p per share)	-	-	-
2008 final dividend (2.0p per share)	-	-	-
2009 interim dividend (1.0p per share)	-	188	-
	-	188	-
6    Half year report

The condensed financial statements were approved by the Board of Directors on 17 December 2009 and are available on the Company's website, www.northernbear.plc.uk. Copies will be sent to shareholders and are available on application to the Company's registered office.

7    Principal risks and uncertainties

The Directors consider that, except as detailed below, the principal risks and uncertainties which could have a material impact on the Group's performance for the remaining six months of the financial year remain the same as those stated on pages 41 to 44 of our Annual Report and Financial Statements for the year ended 31 March 2009, which are available on our website, www.northernbear.plc.uk. As articulated in the Chairman's statement, current trading conditions and the economic environment remains a key risk for Northern Bear.

8    Statement of directors' responsibilities

The directors named below confirm on behalf of the Board of Directors that to the best of their knowledge:

• The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial

Reporting' as adopted by the EU; and

• The interim management report includes a fair review of the information required by:

• DTR4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

• DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Group during the period; and any changes in the related party transactions described in the last annual report that could do so.

The Directors of Northern Bear Plc are listed in the Annual Report and Financial Statements for the year ended 31

March 2009.

For and on behalf of the Board of Directors

17 December 2009

GSL Forrest

Chief Executive

 

END

 

 

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