Preliminary Results

RNS Number : 9556O
Northern Bear Plc
07 July 2010
 

07 July 2010

 

Northern Bear PLC

 

Preliminary results for the year ended 31 March 2010

 

 

Highlights

 

·      Revenue £35.0m (2009 £41.8m)

·      Operating profit (pre-exceptional) £1.7m (2009 £3.7m)

·      Adjusted (pre-exceptional) earnings per share 4.5p (2009 12.2p)

·      Successful completion of revised banking covenants

 

 

Howard Gold, Chairman of Northern Bear Plc commented:

 

"These results represent a strong performance in the context of the current economic climate, where the UK economy has just emerged from six successive quarters of negative growth and both the sector and geographic region in which we operate were particularly exposed to the downturn.

 

"The new financial year has started well, with strong order books and a healthy pipeline far exceeding the outlook at the corresponding time last year."

 

 

 

 

 

For further information contact:

 

Northern Bear Plc

Graham Forrest - Chief Executive Officer                                    0776 4963751

 

Strand Hanson Ltd

James Harris / James Spinney                                                        020 7409 3494

 

Hansard Group

Adam Reynolds                                                                               020 7245 1100

 

Seymour Pierce Ltd

David Banks / Paul Jewell / Katie Ratner                                     020 7107 8000


Chairman's statement

 

 

Introduction

 

I am pleased to announce the unaudited preliminary results for the period to 31 March 2010, in which Northern Bear delivered another year of profitability (before exceptional items) and positive cash generation at the operating level.

 

Despite a fall in turnover to £35.0 million (2009 £41.8 million), the Group has delivered operating profits before exceptional items of £1.7 million (2009 £3.7 million).  Adjusted (pre-exceptional) earnings per share has fallen to 4.5p (2009 12.2p) and adjusted interest cover is 3.4 times (2009 5.0 times).

 

Administrative expenses (including depreciation but excluding exceptional items) were reduced to £7.6 million (2009 £8.3 million), a fall of 9%, which reflects our robust response to the challenging trading conditions which prevailed throughout the period.

 

Impairment charges, relating to acquired goodwill and asset write-downs, were £1.8 million (2009 £nil).

 

Other exceptional items were £0.5 million (2009 £0.1 million) which included asset provisions, restructuring costs and costs associated with aborted acquisitions.

 

After deducting exceptional expenses of £2.2m (2009: £0.1m) the loss for the year was £1.4m (2009: profit £2.2m) and a basic loss per share 7.2p (2009 earnings 11.2p)

 

I believe that these results represent a strong performance in the context of the current economic climate, where the UK economy has just emerged from six successive quarters of negative growth and both the sector and geographic region in which we operate were particularly exposed to the downturn.

 

Trading

 

The effects of the financial crisis on our sector, which began in mid 2008, gathered momentum during 2009.

 

Against this backdrop, we instigated a comprehensive range of measures to minimise the effect on the profitability of our businesses.  These measures, which were taken very early in the cycle, have resulted in a significant reduction in our fixed cost base, while at the same time protected our market position and the quality of our services.  These actions have enabled us to move forward again, as we begin to see the return of some stability and an upturn in certain areas of the business.

 

The trading period was characterised by a sustained weakening of our end markets which continued until late summer 2009.  As I reported in my Interim Statement in December 2009, we began to experience an increase in activity during the course of the autumn 2009, which gave us cause for cautious optimism. The extreme cold weather conditions and snow experienced in January and February 2010 resulted in particularly difficult trading during these months, however, we saw a significant improvement in activity during March. 

 

 

Cash flow

 

Following an increase in our net debt in the first six months, cash generation was particularly strong in the second half of the financial year.  Our net bank debt at the year end was less than £9 million, with facilities of £10.0 million. 

 

This reflects the focus our financial and operational teams place on cash management.

 

In December 2009, we agreed new banking covenants, but as a result of our strong cash generation, the schedule of debt repayments was maintained.  The Group's bankers remain very supportive and this provides us with a solid financial foundation on which to continue building in 2010 and beyond.  In addition, subsequent to the year end, we have recently paid our last tranche of vendor deferred consideration and our financial lease obligations are now less than £0.25 million.

 



Risk management

 

Risk management is an important priority on every project that we undertake, however small. 

 

The safety of our staff, clients and the general public is of paramount importance.  We take this responsibility very seriously and ensure that all risks are properly assessed, then devise strategies to manage and minimise such risks.

 

Our commitment to risk management has led to the creation of Northern Bear Safety, our fourteenth operating business.  This is in line with our policy of identifying opportunities for organic growth.  This business is led by Jason Harrison, the Managing Director and a Chartered Member of the Institute of Occupational Safety and Health (IOSH). 

 

Northern Bear Safety, as well as providing health and safety services to our Group companies, has an expanding portfolio of external clients.

 

Since joining the Group, Jason and his team have driven up standards of health and safety significantly.  Our number of accidents in 2009 was less than 40% of that in 2007.  Further, our accident incident rate (AIR) was less than 56% of the national average for construction companies.

 

Dividend

 

The Board have decided that, since cash conservation is of prime importance, it is prudent to withhold the dividend but will look to reinstate it at the earliest possible opportunity. 

 

Board of Directors and Advisors

 

We were delighted to welcome back Steve Roberts as Finance Director to the executive team during the year.  Steve was the Finance Director at the time that Northern Bear's shares were admitted to trading on AIM, subsequently converting to a non-executive role in 2007. 

 

Steve was instrumental in successfully concluding our revised banking covenants.  The significant improvement in cash management is testament to the controls and procedures he and his team have introduced and implemented.

 

Strand Hanson remains our nominated advisor and were joined by Seymour Pierce, as corporate broker, in January 2010.

 

Outlook

 

The new financial year has started well, with strong order books and a healthy pipeline both far exceeding the outlook at the corresponding time last year. 

 

Public spending cuts are inevitable; we must ensure that we are well placed to secure orders where they are available, on terms we find acceptable.  To achieve this, the quality of our work must be of the highest possible standard in order to maintain our reputation, and we remain focussed on this goal.

 

While we remain cautious about the overall economic environment, we feel the Group is well placed to take advantage of opportunities for its businesses as they arise.

 

Acquisitions remain a key element of our long term growth strategy.  We continue to look for quality companies with strong management teams that complement our existing businesses.  For the foreseeable future, any acquisitions will be funded with a combination of vendor equity and from the Company's own resources, without any recourse to additional bank debt.

 



People

 

The day to day management of our businesses remains fundamental to the success of the Group and this requires not only skill and experience, but also hard work and commitment.

 

Our operational management team strive to satisfy our clients' needs in terms of both quality and speed of service.  This ensures we retain our trusted position with long term clients, and gives me considerable confidence for the future.

 

I would like to thank all of our employees across the Group for their substantial efforts over the past 12 months and their contribution towards the Group's trading performance.

 

 

 

 

 

 

 

 

 

 

Howard Gold
Non Executive Chairman

 



Consolidated statement of comprehensive income

for the year ended 31 March 2010 (unaudited)

 

 

2010

2009

 

Before
exceptional
items

 

Exceptional
items

 

 

Total

Before
exceptional
items

 

Exceptional
items

 

 

Total

 

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

Revenue

34,984

-

34,984

41,758

-

41,758

Cost of sales

(25,589)

-

(25,589)

(29,609)

-

(29,609)

 

            

            

            

            

            

            

Gross profit

9,395

-

9,395

12,149

-

12,149

Other operating income

23

-

23

27

-

27

Administrative expenses

 

 

 

 

 

 

  Impairment charges

-

(1,806)

(1,806)

-

-

       -

  Share based payments

(60)

-

(60)

(91)

-

(91)

  Other administrative expenses

(7,617)

(514)

(8,131)

(8,339)

(129)

(8,468)


            

            

            

            

            

            

Operating profit/(loss)

1,741

(2,320)

(579)

3,746

(129)

3,617

Finance income

-

-

-

25

-

25

Finance expenses

(531)

-

(531)

(785)

-

(785)


            

            

            

            

            

            

Profit/(loss) before income tax

1,210

(2,320)

(1,110)

2,986

(129)

2,857

Income tax expense

(365)

114

(251)

(685)

-

(685)


            

            

            

            

            

            

Profit/(loss) for the period

845

(2,206)

(1,361)

2,301

(129)

2,172

 

           

            

             

           

           

           

Total comprehensive income attributable to equity holders of the parent

 

 

 

 

(1,361)

 

 

 

 

2,172

 

 

 

             

 

 

           

Basic (loss)/earnings per share

 

 

(7.2p)

 

 

11.5p

 

 

 

             

 

 

          

Diluted (loss)/earnings per share

 

 

(7.2p)

 

 

11.5p

 

 

 

             

 

 

          

Adjusted (pre-exceptional) earnings per share

 

 

 

4.5p

 

 

 

12.2p

 

 

 

             

 

 

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Consolidated statement of changes in equity

for the year ended 31 March 2010 (unaudited)

 

 

 

Share
capital

Share
premium

Merger
reserve

Retained
earnings

Total
equity


 

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

At 1 April 2008

 

170

5,021

10,935

1,631

17,757

Profit for the year

-

-

-

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

Loss for the year

-

-

-

(1,361)

(1,361)

Equity settled share based payment transactions

-

-

-

60

60


 

            

            

            

            

            

At 31 March 2010

 

190

5,169

12,586

2,029

19,974


 

            

            

            

            

            


 

 

 

 

 

 



Consolidated balance sheet

at 31 March 2010 (unaudited)        

 

 

 

2010

2009

 

 

 

£000

£000

Assets

 

 

 

 

Property, plant and equipment

 

 

3,126

3,705

Intangible assets

 

 

23,623

25,264

Other investments

 

 

11

11

 

 

 

             

             

Total non-current assets

 

 

26,760

28,980

 

 

 

             

             

Inventories

 

 

916

929

Trade and other receivables

 

 

7,838

7,482

Prepayments for current assets

 

 

233

370

Cash and cash equivalents                             

 

 

355

750

 

 

 

             

             

Total current assets

 

 

9,342

9,531

 

 

 

             

             

Total assets

 

 

36,102

38,511

 

 

 

             

             

 

 

 

 

 

Equity

 

 

 

 

Share capital

 

 

190

190

Share premium

 

 

5,169

5,169

Merger reserve

 

 

12,586

12,586

Retained earnings

 

 

2,029

3,330

 

 

 

             

             

Total equity attributable to equity holders of the company

 

19,974

21,275

 

 

 

             

             

Liabilities

 

 

 

 

Loans and borrowings

 

 

3,810

4,671

Deferred tax liabilities

 

 

62

48

 

 

 

             

             

Total non-current liabilities

 

 

3,872

4,719

 

 

 

             

             

Bank overdraft

 

 

4,327

3,489

Loans and borrowings

 

 

1,425

1,881

Trade and other payables

 

 

6,176

6,241

Current tax payable

 

 

278

456

Deferred consideration

 

 

50

450

 

 

 

             

             

Total current liabilities

 

 

12,256

12,517

 

 

 

             

             

Total liabilities

 

 

16,128

17,236

 

 

 

             

             

Total equity and liabilities

 

 

36,102

38,511

 

 

 

             

             

 

The line item ' deferred income' has been reclassified as 'deferred consideration' to reflect the nature of the liability.


Consolidated statement of cash flows

for the year ended 31 March 2010 (unaudited)

 

 

2010

2009

(as restated)

 

£000

£000

Cash flows from operating activities

 

 

(Loss)/profit for the period

(1,361)

2,172

Adjustments for:

 

 

Depreciation

566

670

Impairment

1,806

-

Finance income

-

(25)

Finance expense

531

785

Loss/(profit) on sale of property, plant and equipment

60

(4)

Equity settled share-based payment expenses

60

91

Income tax expense

251

685

 

             

             

 

1,913

4,374

 

 

 

Change in inventories

(67)

(527)

Change in trade and other receivables

(356)

1,151

Change in prepayments

9

22

Change in trade and other payables

(65)

(723)

 

             

             

 

1,434

4,297

Interest received

-

25

Interest paid

(531)

(785)

Tax paid

(415)

(1,352)

 

             

             

Net cash from operating activities

488

2,185

 

             

             

Cash flows from investing activities

 

 

Proceeds from sale of property, plant and equipment

147

74

Acquisition of subsidiary, net of cash acquired

(400)

(4,222)

Acquisition of property, plant and equipment

(139)

(173)

 

             

             

Net cash from investing activities

(392)

(4,321)

 

             

             

Cash flows from financing activities

 

 

Proceeds from new borrowings

-

3,500

Repayment of borrowings

(1,064)

(1,740)

Payment of finance lease liabilities

(265)

(230)

Dividends paid

-

(564)

 

             

             

Net cash from financing activities

(1,329)

966

 

             

             

Net decrease in cash and cash equivalents

(1,233)

(1,170)

Cash and cash equivalents at start of year

(2,739)

(1,569)

 

             

             

Cash and cash equivalents at end of year

(3,972)

(2,739)

 

             

             

The comparative disclosures have been restated to reclassify £150,000 cash outflows from operating activities ('change in deferred income') to investing activities ('acquisition of subsidiary, net of cash acquired') to reflect the nature of the payment being settlement of deferred consideration in relation to past business combinations.  This reclassification has no impact on the income statement or balance sheet.



Notes

 

1              Basis of preparation

The preliminary announcement has been prepared in accordance with the recognition and measurement principles of International financial Reporting Standards as adopted by the EU (Adopted IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.  It does not include all the information required for full annual accounts.

 

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 2010 or 2009.  The financial information for 2009 is derived from the statutory accounts for 2009, which have been delivered to the Registrar of Companies.  The auditors have reported on the 2009 accounts; their report was i) unqualified, ii) drew attention by way of emphasis, without qualifying their report, to the Company's and Group's ability to continue as a going concern, and iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.  The statutory accounts for 2010 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 preliminary announcement is unaudited and been prepared using the accounting policies, published in the Group's accounts for the year ended 31 March 2009, which are available on the Company's website www.northern-bear.com with the exception of the following standards, amendments and interpretations which became effective during the year and were adopted by the Group:

 

·      Amendments to IAS 1 'Presentation of financial statements'

·      IFRS 8 'Operating segments'

 

3             Exceptional items

Administrative expenses include the following exceptional expenses:

 

 

2010

2009

 

£000

£000

 

 

 

Impairment - goodwill

1,641

-

Impairment - property

165

-

Restructuring

246

129

Trade receivable provisions

161

-

Aborted transaction costs

107

-

 

             

             

 

2,320

129

 

             

             

 

 



4              Earnings/(loss) per share

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

 

 

 

 

 

 

 

 

 

2010

2009

 

 

 

 

 

(Loss)/profit for the period (£000)

 

 

(1,361)

2,172

Weighted average number of ordinary shares ('000)

 

 

18,967

18,814

(Loss)/earnings per share

 

 

(7.2)p

11.5p

 

 

 

             

                        

The calculation of diluted earnings per share was based on the profit/(loss) 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:

 

 

2010

2009

 

 

 

(Loss)/profit for the period (£000)

(1,361)

2,172

Weighted average number of ordinary shares ('000)

18,967

18,814

(Loss)/earnings per share

(7.2)p

11.5p

 

             

             

Share options in issue during the current year do not have a dilutive impact on the loss per share calculation.

The calculation of adjusted earnings per share was based on the profit/(loss) for the period, adjusted for exceptional charges, and on the weighted average number of ordinary shares outstanding, calculated as follows:

 

 

2010

2009

 

 

 

(Loss)/profit for the period (£000)

(1,361)

2,172

Exceptionals

2,206

129

 

            

             

Profit for the period before exceptionals

845

2,301

Weighted average number of ordinary shares ('000)

18,967

18,814

Adjusted earnings per share

4.5p

12.2p

 

             

             

 

5              Dividends

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

Dividend paid

 

              2010

            2009

 

Pence
per share

 

£000

Pence
per share

 

£000


 

 

 

 

2009 interim dividend

-

-

1.0

188

2008 final dividend

-

-

2.0

376

 

             

             

             

             

 

 

-

 

564

 

 

              

 

             

 



 

6              Principal risks and uncertainties

The nature of the building services industry means that the Group is subject to a number of risk factors. Some of these factors apply to the building services industry generally, while others are specific to the Group's activities within that market.

Investment objectives

There can be no guarantee that the strategy of the Group will be achieved.

Economic stability

The success of an investment in the Group depends, in part, on the stability of the economic situation in the North of England and the continuation of government expenditure programmes.

Key clients

There can be no guarantee that the Group's clients will not change suppliers.

Dependence on personnel

The Group is dependent on the principal members of its management. Retaining qualified personnel, consultants and advisors will be important to the Group's success. There can be no assurance that the Group will be able to recruit or retain its personnel on acceptable terms given the competition for such personnel from competing businesses. The loss of any of the Group's personnel could impede the achievement of its objectives.

 


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