NORTHERN BEAR PLC

Earnings Release • Jul 13, 2015

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RNS Number : 7927S

Northern Bear Plc

13 July 2015

13 July 2015

Northern Bear PLC

("Northern Bear" or the "Company")

Preliminary results for the year ended 31 March 2015

The board of directors of Northern Bear (the "Board") is pleased to announce its preliminary results for the year ended 31 March 2015.

Highlights

·           Profit before tax of £1.9m (2014: £1.8m)

·           Basic earnings per share 8.5p (2014: 7.6p)

·           Cash generated from operations £2.4m (2014: £2.1m)

·           Net bank debt decreased to £4.8m (2014: £5.6m)

·           Final dividend of 1.5p per share proposed (2014: 0.75p)

Steve Roberts, Executive Chairman of Northern Bear commented:

"The year ended 31 March 2015 saw further strong performance across our businesses, which is testament to the hard work of our staff.  Whilst continuing to reward shareholders through dividend payments and further reducing bank debt, the Group remains well placed to take advantage of acquisition opportunities as and when they arise."

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 Group's results for the year to 31 March 2015.

The Group has delivered another strong performance, with profit for the year of £1.5m (2014: £1.3m) and basic earnings per share of 8.5p (2014: 7.6p).      

Trading

Trading during the year again exceeded internal management forecasts and prior year results, despite the impact of exceptional and non-recurring items referred to below. 

The Group's revenue increased to £41.7m (2014: £36.8m) and its gross profit also increased to £9.8m (2014: £9.2m).  Turnover growth has been achieved, at varying levels, across the Group.  Given the Group structure, the level of growth in individual companies will cause variations in the gross margin percentage as a result of the Group sales mix.    

Operating profit increased to £2.5m (2014: £2.2m) despite the impact of the exceptional bad debt of £259,000 referred to below.  Profit before tax for the year was £1.9m (2014: £1.8m) after the impact of the write off of unamortised bank facility fees.  The Group successfully controlled its administrative overheads in the year despite the significant growth in turnover.  Whilst Group turnover increased by 13.4 per cent, administrative expenses, excluding the exceptional bad debt and share-based payment, increased by only 1.3 per cent.    

Exceptional bad debt

As stated in the Company's trading update released on 15 June 2015, Tony Nygate and Graham Newton of BDO LLP were appointed as Administrators of GB Building Solutions Limited ("GB Building Solutions") on 9 March 2015. The Group had an exposure of £259,000 and this has been fully provided for in these results as an exceptional item in administrative expenses.  It is hoped that the Group will generate additional work in relation to the completion of the projects for which GB Building Solutions were previously responsible. 

Despite operating in a difficult sector in recent years, Northern Bear has an impressive record in terms of minimising bad debts, despite some well publicised failures in the sector in which it operates. 

Bank facilities and fees

Historically, directly attributable bank fees were amortised over the life of the term loans to which they related. Having assessed the impact of the bank facility renewal described below, the Group considers that the terms of bank facilities have been substantially modified and accordingly has written off all relevant unamortised fees.  This resulted in a non-recurring charge to finance costs in the year of £239,000.  This is a non cash item as the fees had already been paid and will, together with the interest reduction referred to below, result in a substantial annual saving in finance costs in future years.

Cash flow

Net bank debt at 31 March 2015 was £4.8m (2014: £5.6m).  The strategy of bank debt reduction has been maintained through the year, supported by the Group's strong trading performance, which led to cash generated from operations of £2.4m (2014: £2.1m).  The Group took the opportunity to invest in its fixed asset base during the year whilst taking advantage of increased tax allowances, with capital expenditure of £0.7m (2014: £0.4m).

As previously announced, the Group's bank facilities were renewed on 7 April 2014 and the maturity profile of bank debt was improved through the renewal process.  Facilities were again renewed and renegotiated on 31 March 2015.  As part of this renegotiation, the margin on all bank debt was reduced by 1 per cent to LIBOR plus 3.25 per cent. 

The Group is grateful for the continued support of Yorkshire Bank. 

Dividend

In view of the strong trading performance and reduced net bank debt, I am pleased to announce that the Board proposes the payment of an increased final dividend of 1.5p per share (2014: 0.75p per share) for the year ended 31 March 2015.  This is subject to shareholder approval at the Annual General Meeting to be held on 24 August 2015 and, if approved, will be payable on 28 August 2015 to shareholders on the register at 7 August 2015. 

Operational matters

The Group has recently undertaken a project to streamline its operations, with Northern Bear Building Services Limited, MGM Limited ("MGM") and Northern Bear Safety Limited being integrated into new offices at Team Valley Trading Estate in Gateshead.  Other businesses will also be moved to these new premises shortly.  This strategy has already resulted in operational efficiencies and the opportunity to make significant overhead reductions is already being reflected in current trading figures.

As part of the integration of office facilities, Neil Jukes has been appointed as Managing Director of MGM in addition to his role as Managing Director of Northern Bear Building Services Limited.  Neil has done an excellent job in growing Northern Bear Building Services from a new venture in 2011 to a business making an important contribution to the Group's results.  I am confident that he is the right candidate to take control at MGM. 

From a Health and Safety perspective, the office moves have been of great benefit to the Group.  They have enabled Northern Bear Safety to establish a Construction Industry Trading Board ("CITB") approved training centre which will provide benefits to the Group's employees as well as all of our external Northern Bear Safety customers. 

Outlook

The Board's priority in recent years, even whilst trading conditions have been challenging, has been to use operating cash flow to reduce bank debt levels.  Whilst this remains our overall priority, we will continue to monitor opportunities for other uses of funds generated, including capital investment, bolt-on acquisitions and capital repurchases. 

Current order book levels remain very strong across the Group and the new financial year has started well. Whilst there was a downturn in project commencement pending the outcome of the recent UK General Election, the Company was well positioned to capitalise on future work irrespective of the outcome of that election.  The Group has announced a number of new projects in recent weeks, including Newcastle's Seven Stories refurbishment, Pele Tower in Corbridge and Percy Road in Whitley Bay. 

People

I believe that our strategy of directly employing the majority of our workforce throughout a period of difficult economic conditions, along with continued investment in training new operatives, has been one of the key reasons for the Group's improved performance over the past two financial years.  We have maintained a loyal, dedicated and skilled workforce and this has provided us with the capacity and capability to support increased trading levels now that sector demand has improved. 

The quality and experience of our people and the key customer relationships that they maintain remain fundamental to the Group's success.  I would again like to thank all of our employees for their contribution to the Group's results.

Steve Roberts

Executive Chairman

13 July 2015

Consolidated statement of comprehensive income

for the year ended 31 March 2015

		2015		2014
		£000		£000
Revenue		41,723		36,781
Cost of sales		(31,897)		(27,542)
Gross profit		9,826		9,239
Other operating income		17		20
Administrative expenses
Exceptional expenses		(259)		-
Share based payment		(13)		(1)
Other administrative expenses		(7,116)		(7,025)
		(7,388)		(7,026)
Operating profit		2,455		2,233
Finance income		8		21
Finance costs
Non-recurring finance costs		(239)		-
Other finance costs		(361)		(502)
		(600)		(502)
Profit before income tax		1,863		1,752
Income tax expense		(355)		(417)
Profit for the year		1,508		1,335
Total comprehensive income attributable to equity holders of the parent		1,508		1,335
Earnings per share from continuing operations
Basic earnings per share		8.5p		7.6p
Diluted earnings per share		8.4p		7.5p
Basic adjusted (pre exceptional and non-recurring expenses) earnings per share		10.8p		7.6p
Diluted adjusted (pre exceptional and non-recurring expenses) earnings per share		10.7p		7.5p

Consolidated statement of changes in equity

for the year ended 31 March 2015

		Share capital	Capital redemption	Share premium	Merger reserve	Retained earnings	Total equity
		£000	£000	£000	£000	£000	£000
At 1 April 2013		184	6	5,169	10,371	2,604	18,334
Total comprehensive income for the year
Profit for the year		-	-	-	-	1,335	1,335
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions		-	-	-	-	1	1
At 31 March 2014		184	6	5,169	10,371	3,940	19,670
At 1 April 2014		184	6	5,169	10,371	3,940	19,670
Total comprehensive income for the year
Profit for the year		-	-	-	-	1,508	1,508
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions		-	-	-	-	13	13
Equity dividends paid		-	-	-	-	(133)	(133)
At 31 March 2015		184	6	5,169	10,371	5,328	21,058

Consolidated balance sheet

at 31 March 2015

		2015		2014
		£000		£000
Assets
Property, plant and equipment		2,702		2,530
Intangible assets		21,353		21,355
Total non-current assets		24,055		23,885
Inventories		849		831
Trade and other receivables		9,746		9,151
Prepayments		223		169
Deferred consideration receivable		143		166
Cash and cash equivalents		502		111
Total current assets		11,463		10,428
Total assets		35,518		34,313
Equity
Share capital		184		184
Capital redemption reserve		6		6
Share premium		5,169		5,169
Merger reserve		10,371		10,371
Retained earnings		5,328		3,940
Total equity attributable to equity holders of the Company		21,058		19,670
Liabilities
Loans and borrowings		4,599		1,039
Deferred tax liabilities		140		66
Total non-current liabilities		4,739		1,105
Bank overdraft		-		3,664
Loans and borrowings		1,049		1,169
Trade and other payables		8,368		8,261
Current tax payable		304		444
Total current liabilities		9,721		13,538
Total liabilities		14,460		14,643
Total equity and liabilities		35,518		34,313

Consolidated statement of cash flows

for the year ended 31 March 2015

		2015		2014
		£000		£000
Cash flows from operating activities
Operating profit for the year		2,455		2,233
Adjustments for:
Depreciation		521		496
Amortisation		2		2
Loss on sale of property, plant and equipment		2		16
Equity settled share-based payment transactions		13		1
		2,993		2,748
Change in inventories		(18)		(116)
Change in trade and other receivables		(595)		(1,695)
Change in prepayments		(54)		(26)
Change in trade and other payables		107		1,151
Cash generated from operations		2,433		2,062
Interest received		8		21
Interest paid		(361)		(433)
Tax paid		(421)		(97)
Net cash flow from operating activities		1,659		1,553
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		219		147
Proceeds from subsidiary disposal		23		31
Acquisition of property, plant and equipment		(705)		(436)
Net cash from investing activities		(463)		(258)
Cash flows from financing activities
Increase in bank loans on re-financing of overdraft		4,213		-
Repayment of borrowings		(989)		(564)
Repayment of finance lease liabilities		(232)		(244)
Equity dividends paid		(133)
Net cash from financing activities		2,859		(808)
Net increase in cash and cash equivalents		4,055		487
Cash and cash equivalents at start of year		(3,553)		(4,040)
Cash and cash equivalents at end of year		502		(3,553)

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 2015.

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 2015 or 2014. 

The financial information for the year ended 31 March 2014 is derived from the financial statements for that year, which have been delivered to the Registrar of Companies.  The auditor has reported on the 2014 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 2015 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 for the year divided by the weighted average number of ordinary shares outstanding, excluding those in treasury, calculated as follows:

	2015		2014
Profit for the year (£000)	1,508		1,335
Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)	17,670		17,670
Basic earnings per share	8.5p		7.6p

The calculation of diluted earnings per share is the profit 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:

	2015		2014
Profit for the year (£000)	1,508		1,335
Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)	17,670		17,670
Effect of potential dilutive ordinary shares ('000)	207		90
Diluted weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000)	17,877		17,760
Diluted earnings per share	8.4p		7.5p

The calculation of basic adjusted (pre exceptional and non-recurring expenses) earnings per share is the profit for the year, adjusted for exceptional and non-recurring charges, divided by the weighted average number of ordinary shares outstanding above. Adjusted earnings is calculated as follows:

	2015		2014
Profit for the year (£000)	1,508		1,335
Exceptional and non-recurring expenses (£000)	403		-
Profit for the year before exceptional and non-recurring expenses (£000)	1,911		1,335
Basic adjusted (pre exceptional and non-recurring expenses) earnings per share	10.8p		7.6p

The calculation of diluted adjusted (pre exceptional and non-recurring expenses) earnings per share is calculated as the profit for the year, adjusted for exceptional and non-recurring expenses, divided by the diluted weighted average number of ordinary shares outstanding, both of which are as calculated above, giving rise to a diluted adjusted (pre exceptional and non-recurring expenses) earnings per share of 10.7p (2014: 7.5p).

Exceptional and non-recurring expenses comprise both exceptional expenses included within administrative expenses and non-recurring finance costs included within finance costs, net of corporation tax at the Group's effective tax rate. 

4    Finance income and costs

	2015 £'000		2014 £'000
Finance income
Bank interest	8		21
Finance costs
On bank loans and overdrafts	345		341
Finance charges payable in respect of finance leases and hire purchase contracts	16		28
Amortisation of transaction costs included in borrowings	-		133
Non-recurring write off of unamortised transaction costs included in borrowings	239		-
	600		502

5   Availability of financial statements

The Group's Annual Report and Financial Statements for the year ended 31 March 2015 are expected to be approved by 24 July 2015 and will be posted to shareholders during the week commencing 27 July 2015.  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 9.00am on 24 August 2015. 

This information is provided by RNS

The company news service from the London Stock Exchange

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