Information  X 
Enter a valid email address

Northern Bear Plc (NTBR)

  Print      Mail a friend       Annual reports

Monday 15 July, 2019

Northern Bear Plc

Preliminary Results

RNS Number : 4541F
Northern Bear Plc
15 July 2019
 

 

15 July 2019

Northern Bear PLC

("Northern Bear" or the "Company")

 

Preliminary results for the year ended 31 March 2019

 

The board of directors of Northern Bear (the "Board") is pleased to announce its unaudited preliminary results for the year ended 31 March 2019.

 

Highlights

·      Revenue of £56.6m (2018: £53.6m)

·      Operating profit of £3.3m (2018: £2.8m)

·      Adjusted operating profit* of £3.2m (2018: £3.1m)

·      Basic earnings per share of 14.0p (2018: 10.9p)

·      Adjusted basic earnings per share* of 13.5p (2018: 12.5p)      

·      Cash generated from operations of £5.1m (2018: £1.4m)

·      Net cash position at year end of £2.0m (2018: net bank debt of £0.8m)

·      Increase in proposed final dividend to 3.25p per share (2018: 3.0p)

·      Proposed special dividend of 0.75p per share (2018: 1.0p per share)

* stated prior to the impact of amortisation and other acquisition related adjustments

Steve Roberts, Executive Chairman of Northern Bear, commented:

"I am delighted to be reporting another strong set of results for the year.  We are hopeful of another good year despite ongoing challenging market conditions and political uncertainty. "

 

For further information contact:

Northern Bear PLC

Steve Roberts - Executive Chairman

Tom Hayes - Finance Director

 

+44 (0) 166 182 0369

+44 (0) 166 182 0369

 

Strand Hanson Limited (Nominated Adviser and Broker)

James Harris

James Spinney

James Bellman

+44 (0) 20 7409 3494

 

 

 

 

Chairman's Statement

Introduction

I am pleased to report the results for the year to 31 March 2019 for Northern Bear and its subsidiaries (together, the "Group"). 

The Group's companies have delivered another excellent set of trading results, with turnover and earnings per share ahead of what we had considered to be very strong prior year results.

 

Trading

The Group reported an outstanding set of results for the six months ended 30 September 2018 ("H1 FY19") with particularly strong trading in our Roofing and Specialist Building Services divisions.

Trading was more mixed over the winter period and we released a trading update in March 2019 stating that we expected operating profit for the year (stated prior to amortisation and other adjustments) to be broadly in line with the prior year.  I am pleased to say that, in fact, we had a strong finish to the year, particularly in our Roofing division, where a number of contracts completed in March.  This has contributed to trading for the six months to 31 March 2019 ("H2 FY19") being in line with trading for the six months ended 31 March 2018.  We are, hence, reporting adjusted operating profit slightly ahead of our already very strong prior year results. 

We received a number of comments following our March 2019 trading update. As such, I thought it worthwhile to expand a little on the fact that levels of profitability within the Group are very difficult to predict.

Trading for the companies in our Group is impacted by seasonal, cyclical, political and other factors, sometimes in an unexpected manner. This means that like-for-like company results will vary on a monthly, semi-annual, and annual basis.  Having a portfolio of eleven businesses does help balance, to some extent, this variability in profits but it will always be a factor in our overall performance in any given period.

By way of example, we had a very mild winter in 2018/19 and the natural assumption would be that profitability in our divisions should increase.  Unfortunately, this is not always the case in our business.  Several clients insisted on longer than usual close-down periods in December 2018 and January 2019.  This had a significant effect on the Roofing division in those months.

To further emphasise the point regarding the timing of contracts, whilst continuing to have a strong order book across the entire Group, we experienced a slow first quarter in the new financial year due to a number of contract delays arising from matters which were beyond our control.  The majority of these contracts have now commenced and trading should be much stronger in the second quarter. 

Roofing

Our Roofing division performed ahead of our expectations and of prior year results, during the year and particularly in H2 FY19, with a number of major contracts delivered. During the year we made enforced major changes to our roofing supply base in order to improve both consistency of supply and contract pricing. I am pleased to say that there was a seamless transition, which supported the excellent results for this division. It did, however, have a negative impact on working capital, although cash generation has remained strong.

Specialist Building Services

Our Specialist Building Services division traded ahead of prior year results during H1 FY19, but behind prior year in H2 FY19. 

Isoler Limited ("Isoler"), our fire protection business, has had an exceptional year on the back of some significant contracts being secured and generally increased industry activity levels.  The strong performance should continue into future years as this niche sector remains buoyant.

By contrast H Peel & Sons Limited ("H Peel"), which we acquired in July 2017, traded well in H1 FY19 but had a very disappointing H2 FY19 with a number of contract delays and what we perceive to be reduced industry activity impacted by uncertainty over the Brexit process.  We were aware that H Peel's results can vary year to year and the acquisition was structured such that an element of consideration was contingent on future trading.  Accordingly, £0.3m of the consideration due in July 2019 will not be payable and has been adjusted via the Consolidated Statement of Comprehensive Income. 

We remain confident that H Peel is a high quality business and expect that it will continue to make positive contributions to the Group's results in future years.

Materials Handling

We have previously reported on the retirements of the original Joint Managing Directors of A1 Industrial Trucks Limited ("A1"). Following a transitionary period with an interim appointment, we appointed Stuart Dawson as Managing Director in December 2018. We are pleased to report an improvement in profitability in H2 FY19 relative to the performance in H2 FY18.

Overall Trading

Overall turnover increased to £56.6 million (2018: £53.6 million) and gross profit increased to £11.9 million (2018: £10.5 million).  I am pleased to say that gross margin increased to 21.1% from 19.6% in the prior year, due to sales mix, in particular growth in higher margin specialist building works.  

Administrative expenses increased to £8.7 million (2018: £7.5 million).  This was due to a number of factors, including both increased activity levels and a full year's trading for H Peel, which was acquired during the prior period.

The main factor impacting administrative expenses was remuneration across our trading companies.  All of our subsidiary Managing Directors are paid via a combination of salary and bonus payments.  The bonus is payable based on a percentage of profits achieved in excess of targets, set some years ago, which increase annually. This was, and still is, intended to incentivise our key people to be entrepreneurial and to grow their companies over time, while providing some downside protection for the Group in the event of a bad year.  The higher trading levels at certain companies within the Group, particularly in the Roofing division and at Isoler, resulted in increased bonus payments relative to the prior year.  Total remuneration for main board directors was in line with the prior year.  

As in the prior year, we presented amortisation and certain other adjustments separately within the Consolidated Statement of Comprehensive Income, in addition to an adjusted earnings per share calculation in the notes to the accounts, in order to provide an indication of underlying trading performance. 

Operating profit before amortisation and other adjustments was £3.2 million (2018: £3.1 million).  After taking these adjustments into account, operating profit was £3.3 million (2018: £2.8 million).  This is largely due to the write-back of deferred consideration, in the current year, and transaction costs incurred in the prior year. 

We have also presented adjusted earnings per share for the year, the calculation for which is included later in this document.  Adjusted basic earnings per share was 13.5p (2018: 12.5p).  Reported basic earnings per share was 14.0p (2018: 10.9p).

 

Cash flow and bank facilities

The Group had a net cash position (defined as cash balances less revolving credit facility) of £2.0 million at 31 March 2019 (2018: £0.8 million net bank debt).  Cash generated from operations during the year was £5.1 million (2018: £1.4 million). 

As I reported in the interim results, it must be stressed that while operating cash generation in the year was outstanding, this represents a snapshot at a particular point in time and our net cash/bank debt position can move by up to £1.5 million in a matter of days, given the nature, size and variety of contracts that we work on and the related working capital balances. 

The lowest position during the period was £1.8 million net bank debt, the highest was £2.0 million net cash, and the average was £0.3 million net bank debt.  Hence, the year end position reflected some favourable working capital swings and to an extent would be expected to reverse post year-end. 

The Group's working capital requirements will continue to vary depending on the ongoing customer and contract mix.  I believe that the Group's results, when considered over periods of more than one year, have demonstrated a strong ratio of profit to operating cash generation. 

We retain a £3.5 million revolving credit facility and £1.0 million overdraft facility with Yorkshire Bank.  These facilities provide us with the flexibility to accommodate the above working capital swings, as well as to support a wider range of options for capital allocation and the ability to move quickly should a suitable acquisition opportunity present itself.

 

Dividend policy

In view of the continued strong trading performance of the Group, I am pleased to announce that the Board proposes the payment of an increased final dividend of 3.25p per share (2018: 3.0p per share) for the year ended 31 March 2019.  This is subject to shareholder approval at the Annual General Meeting to be held on 19 August 2019.  If approved, it will be payable on 30 August 2019 to shareholders on the register at 9 August 2019. 

Due to the fact that financial performance in the year exceeded prior year results, we have also decided to distribute funds which are surplus to our strategic requirements.  Accordingly, we are announcing a proposed special dividend of 0.75p per share (2018: 1.0p per share), which is also subject to shareholder approval and payable as above.  

The Board will continue to assess the dividend levels and our intention remains to adjust future dividends in line with the Group's relative performance, after taking into account the Group's available cash, working capital requirements, corporate opportunities, debt obligations and the macro-economic environment at the relevant time. However, I would point out that, having spent many years of paying down bank debt, our flexible bank facilities and in the absence of not using the cash for other strategic purposes, we are well placed to continue with our policy of paying dividends in years even in the event that profitability falls below current and prior year levels.

We do not intend to pay further special dividends if trading continues at current levels, and would only consider doing so should profitability increase further.

 

Outlook

The Group continues to hold a high level of committed orders although, as stated in the Trading section, we have limited short term visibility as to when these orders will be realised. 

Despite the slower first quarter referred to above, the medium and longer term outlook for the financial year remain good and we are hopeful of another strong set of full year results.  We will provide a further update on trading and outlook via the interim report for the six months to September 2019.

 

Strategy

We continue to seek acquisitions of established specialist building services businesses, either in the same or complementary sectors to our current operations.  Our main criteria are that a business is well-established in its sector, has a consistent track record of profitability and cash generation and has a strong management team who are committed to remaining with the business.  Any potential acquisition would, in addition, need to be earnings accretive and provide an acceptable return on investment.

We have recently engaged an advisor to support us in identifying business owners looking to realise equity while securing the long term future of the business and employees.  This has resulted in a significant improvement in the quality of our acquisition pipeline as we have sought to avoid companies being sold via an auction process.  We will continue to exercise caution in this area and, as with H Peel, any acquisitions will be structured to protect our downside in the event that trading is below expectations.

 

People

We have recently included a news feed on our website, in order to provide updates on operational progress that would not need to be released via RNS.  This would include details of ongoing projects and any changes to subsidiary management teams.  Succession planning remains an ongoing focus for us and a programme of succession planning is in place for all of our subsidiary businesses. 

As always, our loyal, dedicated and skilled workforce is a key part of our success and we make every effort to support them through continued training and health and safety compliance. 

 

Conclusion

I am delighted to be able to report another excellent set of results and I would, once more, like to thank all our employees for their hard work and contribution.  

 

 

 

Steve Roberts

Executive Chairman

15 July 2019

 

 

 

Consolidated statement of comprehensive income

for the year ended 31 March 2019

 



2019


2018



£000


£000






Revenue


56,575


53,573

Cost of sales


(44,659)


(43,067)

Gross profit


11,916


10,506

Other operating income


24


23

Administrative expenses


(8,725)


(7,459)

Operating profit (before amortisation and other adjustments)


3,215


3,070

Transaction costs


-


(158)

Deferred consideration adjustments


265


-

Amortisation of intangible assets arising on acquisitions


(152)


(102)

Operating profit


3,328


2,810

Finance costs


(197)


(213)

Profit before income tax


3,131


2,597

Income tax expense


(540)


(613)

Profit for the year


2,591


1,984






Total comprehensive income attributable to equity holders of the parent


2,591


1,984






Earnings per share from continuing operations





Basic earnings per share


14.0p


10.9p

Diluted earnings per share


13.9p


10.8p

 

 

 

 

 

Consolidated statement of changes in equity

for the year ended 31 March 2019

 

 

 

 



Share
capital

Capital

redemption reserve

Share
premium

Merger
reserve

Retained
earnings

Total
equity



£000

£000

£000

£000

£000

£000









At 1 April 2017


184

6

5,169

9,231

5,102

19,692

 

Total comprehensive income for the year







Profit for the year

-

-

-

-

1,984

1,984








Transactions with owners, recorded directly in equity







Issue of shares

5

-

-

-

-

5

Exercise of share options

-

-

-

-

65

65

Equity dividends paid

-

-

-

-

(742)

(742)

Merger reserve arising on acquisition

-

-

-

374

-

374

 

At 31 March 2018


 

189

 

6

 

5,169

 

9,605

 

6,409

 

21,378









At 1 April 2018


189

6

5,169

9,605

6,409

21,378

 

Total comprehensive income for the year







Profit for the year

-

-

-

-

2,591

2,591








Transactions with owners, recorded directly in equity







Exercise of share options

-

-

-

-

17

17

Equity dividends paid

-

-

-

-

(740)

(740)

 

At 31 March 2019


 

189

 

6

 

5,169

 

9,605

 

8,277

 

23,246

 

 

 

 

 

Consolidated balance sheet

at 31 March 2019

 

 



2019


2018



£000


£000

Assets





Property, plant and equipment


3,033


3,050

Intangible assets


20,476


20,628

Trade and other receivables


1,057


-

Total non-current assets


24,566


23,678

 

 





Inventories


652


952

Trade and other receivables


8,450


9,833

Prepayments


259


265

Cash and cash equivalents                             


3,038


1,731

Total current assets


12,399


12,781

 

Total assets


 

36,965


 

36,459

 

Equity





Share capital


189


189

Capital redemption reserve


6


6

Share premium


5,169


5,169

Merger reserve


9,605


9,605

Retained earnings


8,277


6,409

 

Total equity attributable to equity holders of the Company


 

23,246


 

21,378

 

Liabilities





Loans and borrowings


1,236


2,672

Deferred consideration


217


510

Deferred tax liabilities


295


316

Total non-current liabilities


1,748


3,498






Loans and borrowings


232


227

Deferred consideration


97


425

Trade and other payables


11,152


10,333

Current tax payable


490


598

Total current liabilities


11,971


11,583

 

Total liabilities


 

13,719


 

15,081

 

Total equity and liabilities


 

36,965


 

36,459
















 

 

 

 

Consolidated statement of cash flows

for the year ended 31 March 2019

 

 



2019


2018



£000


£000

Cash flows from operating activities





Operating profit for the year


3,328


2,810

 

Adjustments for:





Depreciation


538


559

Amortisation


152


103

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


17


(7)

Deferred consideration adjustments


(265)


-



3,770


3,465

 

Change in inventories


 

163


 

11

Change in trade and other receivables


326


(1,004)

Change in prepayments


6


33

Change in trade and other payables


819


(1,103)

Cash generated from operations

 


5,084


1,402

Interest paid


(127)


(139)

Tax paid


(669)


(483)

Net cash flow from operating activities


4,288


780

 

Cash flows from investing activities





Proceeds from sale of property, plant and equipment


518


186

Acquisition of property, plant and equipment


(581)


(569)

Acquisition of subsidiary (net of cash acquired)


(426)


(866)

Net cash from investing activities


(489)


(1,249)

 

Cash flows from financing activities





(Repayment)/issue of borrowings


(1,498)


511

Repayment of finance lease liabilities


(271)


(216)

Proceeds from the exercise of share options


17


64

Equity dividends paid


(740)


(742)

Net cash from financing activities


(2,492)


(383)

 

Net increase/(decrease) in cash and cash equivalents


 

1,307


 

(852)

Cash and cash equivalents at start of year


1,731


2,583

Cash and cash equivalents at end of year


3,038


1,731

 

 

 

Notes

1    Basis of preparation

This announcement has been prepared in accordance with the Company's accounting policies, which in turn are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission. The accounting policies comply with each IFRS that is mandatory for accounting periods ended 31 March 2019.

 

The following standards, amendments and interpretations, which became effective for the first time, were adopted by the Group for the accounting period ended 31 March 2019:

 

·      IFRS 15 Revenue from Contracts with Customers;

·      IFRS 9 Financial Instruments;

·      IAS 40 Investment Property: Amendment in relation to transfers of investment property;

·      IFRS 2 Share-based Payment: Amendment in relation to classification and measurement of share-based payment transactions;

·      IFRS 4 Insurance Contracts: Amendment in relation to applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts;

·      IFRIC 22 Foreign Currency Transactions and Advance Consideration; and

·      Annual Improvements to IFRSs (2014 - 2016 cycle in respect of IAS 1 and IAS 28).

The adoption of the above standards and interpretations has not had a significant impact on the Group's results for the year or equity.

 

For the purposes of their assessment of the appropriateness of the preparation of the Group's accounts on a going concern basis, the directors have considered the current cash position and forecasts of future trading including working capital and investment requirements.  The Group's forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group and the Company should have sufficient cash resources to meet its requirements for at least the next 12 months. Accordingly, the adoption of the going concern basis in preparing the financial statements remains appropriate.

 

2    Status of financial information

The financial information set out above does not constitute the Company's financial statements for the years ended 31 March 2019 or 31 March 2018. 

 

The financial information for the year ended 31 March 2018 is derived from the financial statements for that year, which have been delivered to the Registrar of Companies.  The auditor has reported on the 2018 financial statements; their report was i) unqualified, ii) did not include references 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 498(2) or (3) of the Companies Act 2006.  

 

The financial statements for 2019 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 following the Company's Annual General Meeting.  The results are unaudited; however, we do not expect there to be any difference between the numbers presented and those within the annual report.

 

3    Earnings per share

 

Basic earnings per share is the profit or loss for the year divided by the weighted average number of ordinary shares outstanding, excluding those in treasury, calculated as follows:

 



2018





Profit for the year (£000)


1,984

Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)


 

18,270




Basic earnings per share


10.9p




 

The calculation of diluted earnings per share is the profit or loss for the year divided by the weighted average number of ordinary shares outstanding, after adjustment for the effects of all potential dilutive ordinary shares, excluding those in treasury, calculated as follows:



2018





Profit for the year (£000)


1,984

Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)


 

18,270

Effect of potential dilutive ordinary shares ('000)


113

Diluted weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)


 

18,383




Diluted earnings per share


10.8p

The following additional earnings per share figures are presented as the directors believe they provide a better understanding of the trading performance of the Group.

Adjusted basic and diluted earnings per share is the profit for the year, adjusted for acquisition related costs, divided by the weighted average number of ordinary shares outstanding as presented above.

Adjusted earnings per share is calculated as follows:



2019





Profit for the year (£000)


1,984

Transaction costs


158

Deferred consideration adjustments



Amortisation of intangible assets arising on acquisitions


102

Unwinding of discount on deferred consideration liabilities


74

Corporation tax effect of above items


(30)

Adjusted profit for the year (£000)


2,288





Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)


 

18,270




Adjusted basic earnings per share


12.5p

Adjusted diluted earnings per share


12.4p

 

4    Finance costs

 



2018

£'000




On bank loans and overdrafts


128

Finance charges payable in respect of finance leases and hire purchase contracts


11

Unwinding of discount on deferred consideration liabilities


74



213

 

5    Trade and other receivables

 



2018

£'000

Non-current assets



Contract retentions


-




Current assets



Trade receivables


6,878

Contract work in progress


994

Contract retentions


1,961



9,833

 

On application of IFRS 15 the Group has changed the presentation of its consolidated balance sheet such that contract retentions due in more than one year are shown in non-current assets.  The amount due in more than one year is presented on an undiscounted basis as the impact of discounting is not considered to be material.  The Group has not restated the consolidated balance sheet at 31 March 2018 in this Report as there is no material impact on net assets.

 

6    Loans and borrowings

 



2018

£'000

Non-current liabilities



Secured bank loans


2,500

Finance lease liabilities


172



2,672




Current liabilities



Current portion of finance lease liabilities


211

Other loans


16



227

 

At 31 March 2019 a total of £1.0 million (2018: £2.5 million) was drawn down on the Group's revolving credit facility, which is committed until 31 May 2020, providing a net cash figure at 31 March 2019 of £2.0 million (2018: net bank debt of £0.8 million) after allowing for cash and cash equivalents of £3.0 million (2018: £1.7 million).

 

The Group also retains a £1 million overdraft facility for working capital purposes. This facility was renewed on 31 May 2019 and is next due for routine review and renewal on 31 May 2020.

 

7   Availability of financial statements

 

The Group's Annual Report and Financial Statements for the year ended 31 March 2019 are expected to be approved by 22 July 2019 and will be posted to shareholders during the week commencing 22 July 2019.  Further copies will be available to download on the Company's website at: http://www.northernbearplc.com/.  It is intended that the Annual General Meeting will take place at the Company's registered office, A1 Grainger, Prestwick Park, Prestwick, Newcastle upon Tyne, NE20 9SJ, at 11:00am on 19 August 2019. 

 

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
FR BIGDRGXBBGCS

a d v e r t i s e m e n t