NORTHERN BEAR PLC — Earnings Release 2013

Aug 27, 2013

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RNS Number : 4544M

Northern Bear Plc

27 August 2013

27 August 2013

Northern Bear PLC

("Northern Bear" or the "Company")

Results for the year ended 31 March 2013

Highlights

·      Profit from continuing operations (before exceptional items) £1.0m (2012: 0.9m)

·      Adjusted (before exceptional items) earnings per share 5.5p (2012: 4.8p)

·      Net bank debt decreased to £6.4m (2012: £7.0m).

Howard Gold, Chairman of Northern Bear Plc commented:

"The Group has continued to perform well, despite difficult trading conditions.  We have seen continued strong performance from our Roofing division and an uplift in the level of new house build projects during the year. 

We have made changes to the Group's management structure during the year, including the appointment of Graham Jennings as Managing Director of the Group in July 2012.  I am confident that this provides us with a more effective management structure to meet the challenges we face going forward. 

Our focus remains on improving earnings and reducing the Group's level of bank debt through operating cash flow generated. 

I would like to thank all our directors and employees for their contribution during the year."

For further information contact:

Northern Bear PLC

Steve Roberts

Chief Financial Officer                                                                                                                 +44 (0) 845 680 2369

Strand Hanson Limited (Nominated Adviser)

James Harris

James Spinney                                                                                                                              +44 (0) 20 7409 3494

Chairman's Statement

Introduction

I am pleased to report the Group's results for the year to 31 March 2013.   

The Group continued to perform well, despite difficult trading conditions, which were exacerbated in 2012 by the wettest summer in England and Wales for 100 years.  Profit from continuing operations, before exceptional items, was £1.0m (2012: £0.9m).  Adjusted earnings per share was 5.5p (2012: 4.8p). 

The Group made changes to its management structure during the period, including the appointment of Graham Jennings as Managing Director of the Group in July 2012. I would like to thank Graham for his contribution to date and am confident his vast experience in the sector will allow him to guide the Group through the continued difficult trading conditions. 

One of the Group's subsidiaries, MGM Ltd, incurred a significant loss in the year ended 31 March 2013 on a contract entered into in February 2011.  This loss has been treated as exceptional in the accounts and details of the loss are provided in Note 7.  In early 2012, Steven Gray (the previous Managing Director of MGM, from whom the Group acquired the company) was asked by the Board to oversee day to day control at MGM. Lance Rainey, formerly joint Managing Director of MGM, left the business in February 2013 and Steven continues to oversee day to day control.

Historically, all divisions were run relatively autonomously, with support from Operations Directors as required. Following the appointment of Graham Jennings as Managing Director, the Group reporting structure has changed so that all divisional Managing Directors now report directly to Graham. In addition, all contracts carrying a significant value or risk for the Group require approval by the Board.

I am pleased with the performance of the rest of the Group, particularly the roofing division where we have seen continued strong performance and also an uplift in the level of new house build projects.  We have continued to deliver savings in central costs although this area remains under constant review. 

The Group's results were not affected in the current period by losses from discontinued operations.  The disposals of The Roof Truss Company (Northern) Limited and Hastie D Burton Limited resulted in £0.2m of exceptional costs being incurred in the prior period.

Trading

The Group continued to experience difficult trading conditions, including the adverse weather in 2012.  Revenue decreased by 3.6% to £35.1m (2012: £36.4m) but the Group managed to increase its gross margins before exceptional items to 23.2% (2012: 22.8%). 

The Group undertook a further review of overheads during the year and this has resulted in a reduction in administrative expenses before exceptional items to £6.5m (2012: £6.7m). 

The market conditions in which the Group operates continue to be challenging and remain impacted by the current uncertain macroeconomic conditions. Despite the continued uncertainty, the Group's order books remain healthy, although the roll out of some of these orders remains difficult to predict.

Cash flow

Net bank debt at 31 March 2013 was £6.4m (2012: £7.0m).

The Board's strategy continues to include a reduction in the level of bank debt and the Group's bank continues to be supportive.

Dividend

Given the aim of reducing bank debt levels, the Board believes that it would not be appropriate to declare a final dividend for the year. 

Strategy / Outlook

The Board's priority over recent years has been to use operating cash flow to reduce bank debt levels. Whilst this strategy will remain, we will continue to monitor opportunities for the use of funds generated, including capital investment, bolt-on acquisitions and capital repurchases.

Order books continue to be healthy and we remain cautiously optimistic with regard to maintaining current levels of trading, although market conditions remain volatile. 

Our overall priority remains to improve earnings and cash flow, as well as to continue reducing the Group's level of bank debt.  In this respect the Group's cost base remains under constant review. 

People

Following Graham Forrest's resignation as Chief Executive Officer of the Company in October 2011, I oversaw an operational review resulting in changes to the Group's management structure.  This resulted in the appointment of Graham Jennings as Managing Director of the Group effective from 30 July 2012.  Keith Soulsby was also re-appointed to the Board as a Director on 11 May 2012.

I am confident that the Group now has a more effective management structure which will allow it to continue to meet the challenges it faces and which is already delivering benefits to the Group. 

Steven Gray resigned from the Board on 7 February 2013. However, Steven remains with the Group in day to day control of MGM Limited.

The quality and experience of our people and the key customer relationships they maintain remain fundamental to the Group's success. 

Howard Gold

Non-Executive Chairman

23 August 2013

Consolidated statement of comprehensive income

for the year ended 31 March 2013

		Before exceptional items	Exceptional items	2013 Total	Before exceptional items	Exceptional items	2012 Total
		£000	£000	£000	£000	£000	£000
Continuing operations
Revenue		35,147	-	35,147	36,412	-	36,412
Cost of sales		(26,985)	(532)	(27,517)	(28,099)	-	(28,099)
Gross profit		8,162	(532)	7,630	8,313	-	8,313
Other operating income		23	-	23	16	-	16
Administrative expenses		(6,458)	(114)	(6,572)	(6,666)	(191)	(6,857)
Operating profit/(loss)		1,727	(646)	1,081	1,663	(191)	1,472
Finance income		-	-	-	1	-	1
Finance expense		(399)	-	(399)	(452)	-	(452)
Profit/(loss) before income tax		1,328	(646)	682	1,212	(191)	1,021
Income tax expense		(350)	155	(195)	(349)	50	(299)
Profit/(loss) from continuing operations		978	(491)	487	863	(141)	722
Discontinued operations
Loss from discontinued operations (net of income tax)		-	-	-	-	(159)	(159)
Profit/(loss) for the year		978	(491)	487	863	(300)	563
Total comprehensive income attributable to equity holders of the parent				487			563
Basic and diluted earnings/(loss) per share
-  continuing operations				2.7p			4.0p
-  discontinued operations				-			(0.9)p
- total operations				2.7p			3.1p

Adjusted (pre exceptional) earnings per share
-  continuing operations				5.5p			4.8p
-  discontinued operations				-			-
- total operations				5.5p			4.8p

Consolidated statement of changes in equity

for the year ended 31 March 2013

		Share capital	Capital redemption	Share premium	Merger reserve	Retained earnings	Total equity
		£000	£000	£000	£000	£000	£000
At 1 April 2011		184	6	5,169	10,371	1,569	17,299
Total comprehensive income for the year
Profit for the year		-	-	-	-	563	563
At 31 March 2012		184	6	5,169	10,371	2,132	17,862
At 1 April 2012		184	6	5,169	10,371	2,132	17,862
Total comprehensive income for year
Profit for the year		-	-	-	-	487	487
Transactions with owners, recorded directly in equity
Buy back of shares		-	-	-	-	(15)	(15)
At 31 March 2013		184	6	5,169	10,371	2,604	18,334

Consolidated balance sheet

at 31 March 2013

			2013		2012
			£000		£000
Assets
Property, plant and equipment			2,418		2,220
Intangible assets			21,357		21,348
Deferred tax assets			-		33
Total non-current assets			23,775		23,601
Inventories			715		807
Trade and other receivables			7,456		7,607
Prepayments			142		194
Deferred consideration receivable			197		222
Cash and cash equivalents			202		243
Total current assets			8,712		9,073
Total assets			32,487		32,674
Equity
Share capital			184			184
Capital redemption reserve			6			6
Share premium			5,169			5,169
Merger reserve			10,371			10,371
Retained earnings			2,604			2,132
Total equity attributable to equity holders of the Company			18,334			17,862
Liabilities
Loans and borrowings			1,692		2,470
Deferred tax liabilities			24		-
Total non-current liabilities			1,716		2,470
Bank overdraft			4,242		4,333
Loans and borrowings			920		858
Trade and other payables			7,109		6,713
Current tax payable			166		438
Total current liabilities			12,437		12,342
Total liabilities			14,153		14,812
Total equity and liabilities			32,487		32,674

Consolidated statement of cash flows

for the year ended 31 March 2013

			2013		2012
			£000		£000
Cash flows from operating activities
Profit  for the year			487		563
Adjustments for:
Depreciation			494		495
Amortisation			2		-
Finance income			-		(1)
Finance expense			399		452
Loss on sale of property, plant and equipment			7		24
Income tax			195		299
			1,584		1,832
Change in inventories and materials handling property,  plant and equipment			(284)		(145)
Change in trade and other receivables			151		(1,579)
Change in prepayments			52		(49)
Change in trade and other payables			396		1,708
			1,899		1,767
Interest received			-		1
Interest paid			(399)		(452)
Tax paid			(410)		(271)
Net cash from operating activities			1,090		1,045
Cash flows from investing activities
Proceeds from sale of property, plant and equipment			80		70
Proceeds from subsidiary disposal, net of cash disposed of			25		644
Purchase of own shares			(15)		-
Acquisition of property, plant and equipment			(228)		(181)
Acquisition of intangible assets			(11)		-
Net cash from investing activities			(149)		533
Cash flows from financing activities
Repayment of borrowings			(684)		(983)
Repayment of finance lease liabilities			(207)		(184)
Net cash from financing activities			(891)		(1,167)
Net increase in cash and cash equivalents			50		411
Cash and cash equivalents at start of year			(4,090)		(4,501)
Cash and cash equivalents at end of year			(4,040)		(4,090)

Notes

1)    Exceptional expenses

One of the Group's subsidiaries, MGM Limited, took on a significant contract for building works on a care home in February 2011. The majority of the work in relation to this contract took place during the financial year ended 31 March 2013. This was a new sphere of work for the Group and, with hindsight, not one that MGM was in a position to carry out at the contracted price. Accordingly, exceptional expenses included within cost of sales of £532,000 (2012: £nil) have been presented separately and comprise the loss on this significant contract (including reversal of previously recognised margin).

Administrative expenses include the following exceptional expenses:

	2013		2012
	£000		£000
Continuing operations:
Redundancy costs	61		86
Legal and professional fees	53		55
Aborted transaction costs	-		50
	114		191
Discontinued operations:
Legal and professional fees	-		159

Redundancy costs include redundancy expenses and the related costs, including professional fees, relating to former Directors of the group and subsidiary undertakings who have not been replaced.

Aborted transaction costs represent fees incurred on potential business acquisitions which aborted.

2) Availability of accounts

The audited Annual Report and Financial Statements for the 12 months ended 31 March 2013 have today been sent to shareholders and published at http://www.northernbearplc.com/. 

This information is provided by RNS

The company news service from the London Stock Exchange

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