REG - Northern Bear Plc - Interim Results
25/11/2022 07:00
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RNS Number : 5504H Northern Bear Plc 25 November 2022
25 November 2022
Northern Bear plc
("Northern Bear" or the "Company")
Interim results for the six month period ended 30 September 2022
The board of directors of Northern Bear (the "Board") is pleased to announce
the unaudited interim results for the Company and its subsidiaries (together
the "Group") for the six months to 30 September 2022.
Financial Summary
· Revenue of £34.0m (H1 FY22: £30.0m)
· Adjusted operating profit* of £1.5m (H1 FY22: £1.5m)
· Net bank debt of £1.9m at 30 September 2022
· Settlement of legal claim against Springs Roofing Limited, as
previously announced on 8 July 2022
· Strong order book supportive of trading for the remainder of the
financial year
* stated prior to the impact of amortisation
Jeff Baryshnik, Non-Executive Chairman of Northern Bear, commented:
"We are pleased to announce solid operating results for the period despite
significant inflationary headwinds. The Group enjoys a strong order book, so
we are well positioned for the remainder of the financial year."
For further information please contact:
Northern Bear plc
Jeff Baryshnik - Non-Executive Chairman +44 (0) 166 182 0369
Tom Hayes - Finance Director +44 (0) 166 182 0369
Strand Hanson Limited (Nominated Adviser and Broker) +44 (0) 20 7409 3494
James Harris
James Bellman
Chairman's statement
Introduction
I am pleased to report the unaudited interim results for the six months ended
30 September 2022 (the "Period", "H1 FY23") for Northern Bear plc (the
"Company" and, together with its subsidiaries, the "Group").
I am pleased to confirm the Group's results for the Period, with adjusted
operating profit (stated prior to the impact of amortisation) of £1.5m (H1
FY22: £1.5m) and diluted earnings per share of 6.0p (H1 FY22: 6.1p).
In our last Annual Report and Accounts published in July 2022, we noted the
continued industry-wide challenges with respect to both availability and price
inflation of construction materials. There also have been well-publicised
challenges in relation to attracting and retaining employees in the
construction industry. Despite the impact of these headwinds on our
businesses, our Group generated solid operating results whilst further
investing in the Group's businesses.
Trading
Despite industry-wide challenges, our Group companies generated strong results
in aggregate during the Period. Our companies have strong and
well-established supplier relationships and have been able, on the whole, to
work with our robust supply chain to ensure continuity of supply for
contracts. Additionally, we have not experienced any slowdown in business to
date despite widely publicised concerns about rising interest rates and their
potential effects on construction generally and the housing market more
specifically.
Revenue for the Period was £34.0m (H1 FY22: £30.0m) and, through the greater
economy of scale from higher revenues along with continued careful contract
selection and execution, gross margins were increased to 20.7% (H1 FY22:
19.5%).
However, administrative expenses increased to £5.6m (H1 FY22: £4.5m) in
large part due to increases in payroll, motor and fuel expenses, insurance
costs, and general cost inflation. The payroll increase relates primarily to
the recruitment of additional commercial and operational staff, in particular
at MGM and Isoler, both of which have performed strongly in recent years and
are businesses where we see further opportunities for profitable growth.
Overall profit before income tax for the Period was £1.4m (H1 FY22: £1.4m)
and diluted earnings per share was 6.0p (H1 FY2022: 6.1p).
Cash flow
Net bank debt at 30 September 2022 was £1.9m (30 September 2021: £0.6m net
cash, 31 March 2022: £2.2m net cash).
We had stated in the 2022 annual results that the cash position at 31 March
2022 reflected some favourable working capital swings which, to an extent,
would be expected to reverse post year-end. This was the case, and the current
customer and contract mix, along with increased turnover levels, has created
an increased working capital requirement which reduced the cash balance during
the Period.
As we announced in July 2022, one of the Company's subsidiaries, Springs
Roofing Limited ("Springs"), settled a claim by Engie Regeneration (FHM)
Limited for £0.6 million, which also impacted the Group's consolidated cash
balances. The claim related to roofing work undertaken between April 2009 and
March 2011 on seven care home properties. The Springs directors believed that
the claim was without merit and this position was supported by third-party
technical expert and legal advice. In reaching the agreed settlement set out
above, Springs considered the management time commitment, the legal costs and
the commercial risk of continued litigation. Springs, and the wider Group,
retain excellent commercial relationships with Engie (now known as Equans),
which continues to be an important and valued customer. The settlement was
satisfied from the Group's existing cash resources in August 2022 and was
previously recorded as an exceptional item in the Group's annual results to
March 2022.
As we have emphasised previously, the net cash/bank debt position represents a
snapshot at a particular point in time and our net cash/bank debt position can
move by up to £1.5m in a matter of days given the nature, size and variety of
contracts and their associated working capital requirements. The highest net
cash position during the Period was £2.1m, the lowest net bank debt position
during the Period was £2.7m, and the average net bank debt position during
the Period was £0.7m.
Our existing £3.5m revolving credit facility with Virgin Money plc
(previously known as Yorkshire Bank) was last renewed in March 2020 and
provides us with committed working capital facilities to May 2023, along with
a £1.0m overdraft facility which is renewable annually. We have already
commenced initial renewal discussions with Virgin Money and these have been
positive to date.
Strategy and Dividend
As previously announced, I commenced a process of engaging with the Board and
management to discuss and review the Group's strategy and approach to capital
allocation with a focus on further increasing shareholder value. As part of
this review, we have increased our emphasis on seeking higher margin business
opportunities with the goal of continually improving our operating margins.
We anticipate completing this review over the coming months.
As a result of this ongoing review, which includes dividend policy, we did not
declare a final dividend for the year ended March 2022. I would note that we
have the cash resources available to pay a final dividend commensurable with
prior year dividends, should we have decided to declare one. Any future
dividends would be in line with the Group's relative performance, after taking
into account the Group's available resources, working capital requirements,
corporate opportunities, debt obligations, and the macro-economic environment.
Outlook
Our forward order book remains strong and should continue to support our
trading performance for the remainder of the financial year, subject to the
ongoing supply chain and staffing challenges noted above, the winter weather
conditions, and the wider macro-economic environment.
We note the Bank of England's recent commentary on the UK economic outlook and
the likelihood of recession, along with the potential impact of higher
interest rates on the construction industry and housing market, and
ever-increasing energy costs.
Our Group traded profitably through the last major recession in 2008-2009 and
we have relatively limited exposure to new build housing work at approximately
10 to 15% of current Group turnover. While we are mindful that trading
conditions may well become more challenging, our results in October were in
line with management expectations and we have not seen any drop-off in trading
to date. Further, although we have been impacted by higher fuel and vehicle
costs in the Period, our Group exposure to heat, light and power costs is
relatively low at less than £0.1m per annum.
Conclusion
I am pleased to report solid results for the Period despite widespread
industry challenges. As always, our loyal, dedicated and skilled workforce is
a key part of our success, and we make every effort to support them, including
through continued training and health and safety compliance. I would like to
thank all of our employees for their hard work and contribution.
Jeff Baryshnik
Non-Executive Chairman
25 November 2022
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 33,951 29,973 61,098
Cost of sales (26,935) (24,114) (48,642)
Gross profit 7,016 5,859 12,456
Other operating income 13 86 99
Administrative expenses (5,573) (4,459) (10,005)
Operating profit (before amortisation and other adjustments) 1,456 1,486 2,550
One-off costs - - (648)
Impairment charge - - (2,612)
Amortisation of intangible assets arising on acquisitions (6) (7) (13)
Operating profit/(loss) 1,450 1,479 (723)
Finance costs (89) (65) (156)
Profit/(loss) before income tax 1,361 1,414 (879)
Income tax expense (234) (270) (449)
Profit/(loss) for the period 1,127 1,144 (1,328)
Total comprehensive income/(loss) attributable to equity holders of the parent 1,127 1,144 (1,328)
Earnings per share from continuing operations
Basic earnings/(loss) per share 6.0p 6.1p (7.1)p
Diluted earnings/(loss) per share 6.0p 6.1p (7.1)p
30 September 2022 30 September 2021 31 March
2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Property, plant and equipment 4,550 3,893 4,413
Right of use asset 1,596 1,183 1,702
Intangible assets 15,413 18,037 15,419
Trade and other receivables 783 1,006 708
Total non-current assets 22,342 24,119 22,242
Inventories 1,383 1,080 1,404
Trade and other receivables 14,535 12,010 12,152
Cash and cash equivalents 150 563 3,233
Total current assets 16,068 13,653 16,789
Total assets 38,410 37,772 39,031
Equity
Share capital 190 190 190
Capital redemption reserve 6 6 6
Share premium 5,169 5,169 5,169
Merger reserve 9,703 9,703 9,703
Retained earnings 7,034 8,362 5,907
Total equity attributable to equity holders of the Company 22,102 23,430 20,975
Liabilities
Loans and borrowings - - 1,000
Trade and other payables 168 - 58
Lease liabilities 1,433 1,078 1,606
Deferred tax liabilities 879 487 879
Total non-current liabilities 2,480 1,565 3,543
Loans and borrowings 2,028 22 38
Deferred consideration - 50 -
Trade and other payables 10,796 11,703 13,210
Provisions - - 600
Lease liabilities 615 565 609
Current tax payable 389 437 56
Total current liabilities 13,828 12,777 14,513
Total liabilities 16,308 14,342 18,056
Total equity and liabilities 38,410 37,772 39,031
Share capital Capital redemption reserve Share premium Merger reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2021 190 6 5,169 9,703 7,218 22,286
Total comprehensive income for the period
Profit for the period - - - - 1,144 1,144
At 30 September 2021 190 6 5,169 9,703 8,362 23,430
At 1 April 2021 190 6 5,169 9,703 7,218 22,286
Total comprehensive income for the year
Loss for the year - - - - (1,328) (1,328)
Transactions with owners, recorded directly in equity
Exercise of share options - - - - 17 17
At 31 March 2022 190 6 5,169 9,703 5,907 20,975
At 1 April 2022 190 6 5,169 9,703 5,907 20,975
Total comprehensive income for the period
Profit for the period - - - - 1,127 1,127
At 30 September 2022 190 6 5,169 9,703 7,034 22,102
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Operating profit/(loss) for the period 1,450 1,479 (723)
Adjustments for:
Depreciation of property, plant and equipment 361 312 671
Depreciation of lease asset 204 174 374
Amortisation 6 7 13
Impairment charge - - 2,612
Profit/(loss) on sale of property, plant and equipment (16) (5) (29)
2,005 1,967 2,918
Change in inventories 21 (106) (430)
Change in trade and other receivables (2,458) (2,301) (2,145)
Change in trade and other payables (2,903) (355) 1,810
Cash (used in)/generated from operations (3,335) (795) 2,153
Interest paid (56) (42) (101)
Tax paid 99 111 (57)
Net cash flow from operating activities (3,292) (726) 1,995
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 193 240 588
Acquisition of property, plant and equipment (614) (727) (1,747)
Acquisition of subsidiary (net of cash acquired) - - (50)
Net cash from investing activities (421) (487) (1,209)
Cash flows from financing activities
Issue of borrowings 990 - 1,010
Repayment of borrowings - (6) -
Repayment of lease liabilities (360) (332) (694)
Proceeds from the exercise of share options - - 17
Net cash from financing activities 630 (338) 333
Net decrease in cash and cash equivalents (3,083) (1,551) 1,119
Cash and cash equivalents at start of period 3,233 2,114 2,114
Cash and cash equivalents at end of period 150 563 3,233
1. Basis of preparation
These interim consolidated financial statements have been prepared using accounting policies based on International Financial Reporting Standards (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the UK. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31 March 2022 Annual Report and Financial Statements. The financial information for the half years ended 30 September 2022 and 30 September 2021 does not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006 and both periods are unaudited. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34 Interim Financial Reporting.
The annual consolidated financial statements of Northern Bear plc (the "Company", or, together with its subsidiaries, the "Group") are prepared in accordance with the requirements of the Companies Act 2006 and UK adopted International Accounting Standards. The comparative financial information for the year ended 31 March 2022 included within this report does not constitute the full statutory Annual Report for that period. The statutory Annual Report and Financial Statements for the year ended 31 March 2022 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 March 2022 was i) unqualified, ii) did not draw attention to any matters by way of emphasis, and iii) did not contain a statement under 498(2) - (3) of the Companies Act 2006.
2. Accounting policies
The Group has applied the same accounting policies and methods of computation
in its interim consolidated financial statements as in its 2022 annual
financial statements, as set out in Notes 2 and 3 of that document, except for
those that relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 April 2022, and will be adopted in
the 2023 financial statements. The accounting policies applied are based on
the recognition and measurement principles of IFRS in issue as adopted by the
UK and are effective at 31 March 2023 or are expected to be adopted and
effective at 31 March 2023.
New and amended standards and interpretations issued by the IASB that will
apply for the first time in the next annual financial statements include:
· Reference to the Conceptual Framework (Amendments to IFRS 3
Business Combinations) - effective date on or after 1 January 2022;
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16) - effective date on or after 1 January 2022;
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37 Provisions, Contingent Liabilities and Contingent Assets) - effective
date on or after 1 January 2022; and
· Annual improvements 2018-2020 cycle - effective date on or after
1 January 2022.
Adoption of the above standards and interpretations is not expected to have a
material impact on the Group's financial statements.
3. Taxation
The taxation charge for the six months ended 30 September 2022 is calculated
by applying the Directors' best estimate of the annual effective tax rate to
the profit for the period.
4. Earnings per share
Basic earnings per share is the profit or loss for the period divided by the
weighted average number of ordinary shares outstanding, excluding those held
in treasury, calculated as follows:
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
Profit/(loss) for the period (£'000) 1,127 1,144 (1,328)
18,725 18,665 18,674
Weighted average number of ordinary shares excluding shares held in treasury
for the proportion of the year held in treasury ('000)
Basic earnings/(loss) per share 6.0p 6.1p (7.1)p
The calculation of diluted earnings per share is the profit or loss for the
period 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:
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
Profit/(loss) for the period (£'000) 1,127 1,144 (1,328)
18,725 18,665 18,674
Weighted average number of ordinary shares excluding shares held in treasury
for the proportion of the year held in treasury ('000)
Effect of potential dilutive ordinary shares ('000) 15 43 42
Diluted weighted average number of ordinary shares excluding shares held in 18,740 18,708 18,716
treasury for the proportion of the year held in treasury ('000)
Diluted earnings/(loss) per share 6.0p 6.1p (7.1)p
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 or loss for the
period, adjusted for impairment charges, acquisition related items, and
transaction and other one-off costs, divided by the weighted average number of
ordinary shares outstanding as presented above.
Adjusted earnings per share is calculated as follows:
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
Profit/(loss) for the period (£'000) 1,127 1,144 (1,328)
Impairment charge - - 2,612
One-off costs - - 648
Amortisation of intangible assets arising on acquisitions 6 7 13
Corporation tax effect of above items - - (123)
Adjusted profit for the period (£'000) 1,133 1,151 1,822
18,725 18,665 18,674
Weighted average number of ordinary shares excluding shares held in treasury
for the proportion of the year held in treasury ('000)
Adjusted basic earnings per share 6.1p 6.2p 9.8p
Adjusted diluted earnings per share 6.0p 6.2p 9.7p
5. Finance costs
6 months ended 6 months ended Year ended
30 September 2022 30 September 2021 31 March 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
On bank loans and overdrafts 56 42 101
Finance charges on lease liabilities 33 23 55
Total finance costs 89 65 156
6. Principal risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance in the remaining six months
of the financial year remain the same as those stated on page 11 to 14, and 68
to 71 of our Annual Report and Financial Statements for the year ended 31
March 2022, which are available on the Company's website,
www.northernbearplc.com (http://www.northernbearplc.com) .
7. Half year report
The condensed financial statements were approved by the Board of Directors on
25 November 2022 and are available on the Company's website,
www.northernbearplc.com (http://www.northernbearplc.com) . Copies will be
sent to shareholders and are available on application to the Company's
registered office.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law pursuant to
the European Union (Withdrawal) Act 2018, as amended.
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