TIDMNTBR
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 GBP56.6m (2018: GBP53.6m)
-- Operating profit of GBP3.3m (2018: GBP2.8m)
-- Adjusted operating profit* of GBP3.2m (2018: GBP3.1m)
-- 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 GBP5.1m (2018: GBP1.4m)
-- Net cash position at year end of GBP2.0m (2018: net bank debt of GBP0.8m)
-- 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:
+44 (0) 166
Northern Bear PLC 182 0369
Steve Roberts - Executive Chairman +44 (0) 166
Tom Hayes - Finance Director 182 0369
Strand Hanson Limited (Nominated Adviser
and Broker)
James Harris
James Spinney +44 (0) 20 7409
James Bellman 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, GBP0.3m 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 GBP56.6 million (2018: GBP53.6
million) and gross profit increased to GBP11.9 million (2018:
GBP10.5 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 GBP8.7 million (2018:
GBP7.5 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
GBP3.2 million (2018: GBP3.1 million). After taking these
adjustments into account, operating profit was GBP3.3 million
(2018: GBP2.8 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 GBP2.0 million at 31 March 2019
(2018: GBP0.8 million net bank debt). Cash generated from
operations during the year was GBP5.1 million (2018: GBP1.4
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 GBP1.5 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 GBP1.8 million net
bank debt, the highest was GBP2.0 million net cash, and the average
was GBP0.3 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 GBP3.5 million revolving credit facility and GBP1.0
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
GBP000 GBP000
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 Share Merger Retained Total
capital redemption premium reserve earnings equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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
GBP000 GBP000
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
GBP000 GBP000
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:
2019 2018
Profit for the year (GBP000) 2,591 1,984
Weighted average number of ordinary shares
excluding shares held in treasury for the proportion
of the year held in treasury ('000) 18,515 18,270
-------- --------
Basic earnings per share 14.0p 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:
2019 2018
Profit for the year (GBP000) 2,591 1,984
-------- --------
Weighted average number of ordinary shares
excluding shares held in treasury for the proportion
of the year held in treasury ('000) 18,515 18,270
Effect of potential dilutive ordinary shares
('000) 63 113
-------- --------
Diluted weighted average number of ordinary
shares excluding shares held in treasury for
the proportion of the year held in treasury
('000) 18,577 18,383
-------- --------
Diluted earnings per share 13.9p 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 2019
Profit for the year (GBP000) 2,591 1,984
Transaction costs - 158
Deferred consideration adjustments (265)
Amortisation of intangible assets arising on
acquisitions 152 102
Unwinding of discount on deferred consideration
liabilities 70 74
Corporation tax effect of above items (43) (30)
-------- --------
Adjusted profit for the year (GBP000) 2,505 2,288
Weighted average number of ordinary shares
excluding shares held in treasury for the proportion
of the year held in treasury ('000) 18,515 18,270
-------- --------
Adjusted basic earnings per share 13.5p 12.5p
Adjusted diluted earnings per share 13.5p 12.4p
-------- --------
4 Finance costs
2019 2018
GBP'000 GBP'000
On bank loans and overdrafts 106 128
Finance charges payable in respect of finance
leases and hire purchase contracts 21 11
Unwinding of discount on deferred consideration
liabilities 70 74
-------- --------
197 213
-------- --------
5 Trade and other receivables
2019 2018
GBP'000 GBP'000
Non-current assets
Contract retentions 1,057 -
Current assets
Trade receivables 7,094 6,878
Contract work in progress 277 994
Contract retentions 1,079 1,961
-------- --------
8,450 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
2019 2018
GBP'000 GBP'000
Non-current liabilities
Secured bank loans 1,000 2,500
Finance lease liabilities 236 172
-------- --------
1,236 2,672
-------- --------
Current liabilities
Current portion of finance lease liabilities 214 211
Other loans 18 16
-------- --------
232 227
-------- --------
At 31 March 2019 a total of GBP1.0 million (2018: GBP2.5
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 GBP2.0 million (2018: net bank debt of GBP0.8
million) after allowing for cash and cash equivalents of GBP3.0
million (2018: GBP1.7 million).
The Group also retains a GBP1 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 rns@lseg.com or visit www.rns.com.
END
FR BIGDRGXBBGCS
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July 15, 2019 02:00 ET (06:00 GMT)
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