REG - Northern Bear Plc - Interim Results
29/11/2024 07:00
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RNS Number : 1005O Northern Bear Plc 29 November 2024
29 November 2024
Northern Bear plc
("Northern Bear" or the "Company")
Interim results for the six month period ended 30 September 2024
Northern Bear (LSE:NTBR), the AIM quoted holding company of the group of
companies providing specialist building and support services headquartered in
Northern England and serving customers across the UK, is pleased to announce
its unaudited interim results for the Company and its subsidiaries (together
the "Group") for the six months to 30 September 2024 (the "Period" or "H1
FY25").
Financial Summary
· Revenue of £37.6m (H1 FY24: £36.9m)
· Gross profit of £8.9m (H1 FY24: £8.2m)
· Gross margin improved to 23.8% (H1 FY24: 22.2%)
· Operating profit of £1.7m (H1 FY24: £1.8m) following
significant investment in operations
· Earnings per share of 8.4p (H1 FY24: 6.7p)
· Cash generated from operations £2.2m (H1 FY24: £1.3m cash
outflow)
· Equity dividends paid in the Period of £0.3m (H1 FY24: £0.6m)
· £0.5m repaid on Virgin Money term loan in November 2024
following strong cash generation
Operational and Commercial Summary
· The Board of Directors of Northern Bear (the "Board") is pleased
with the Group's performance in the Period, with revenue and profits ahead of
management expectations.
· We have seen improved gross margins through continued growth in
higher margin areas of the Group's businesses, along with continued careful
contract selection and management.
· As intended and previously announced, we have continued to invest
in our operations to support future revenue growth, including:
o Isoler Limited - promotion of Josh Watson to joint Managing Director;
relocation to larger premises in Durham; and commenced establishment of a new
Southern delivery hub.
o Callisto Glass Facades - new division in MGM Limited, providing bespoke
design, manufacture and installation of architectural glass facades.
o Alcor Handling Solutions Limited - continued investment in materials
handling fleet.
· As always, the results in the Period are testament to the hard
work and commitment of the Group's employees.
Outlook
· The Board confirms that the Group is trading in line with market
expectations.
· The Group has traded very well during the first half of FY25 and
has the potential in the second half to trade ahead of strong prior year
results and market expectations. This is on the assumption, inter alia, that
current market conditions remain, the additional investment in operations
continues to meet revenue expectations, and that there is no major
weather-related disruption which had a significant impact in H2 FY24.
· Our forward order book remains strong and should support our
trading performance in the coming months.
· A further update on trading will be released in the new year and
prior to the financial year-end.
Simon Carr CBE, Non-Executive Chairman of Northern Bear, commented:
"I am pleased to report that we remain in a strong financial position and have
continued to make good progress against our medium-term objectives. This has
been possible in the main by a combination of continued investment, organic
growth and focus on cash generation, which has underpinned the results in the
period.
I was delighted to be appointed Non-Executive Chairman of Northern Bear plc in
the summer of this year. Since then, I have been working very closely with the
board of Northern Bear plc and have also now met with all the senior
management teams of all the trading subsidiaries. I have been very impressed
by their enthusiasm, talent and dedication to the business. I would also like
to join our CEO in thanking all the employees for their hard work and
commitment, and our shareholders for their continued support."
For further information please contact:
Northern Bear plc
John Davies - Chief Executive Officer +44 (0) 166 182 0369
Tom Hayes - Finance Director +44 (0) 166 182 0369
Strand Hanson Limited (Nominated Adviser) +44 (0) 20 7409 3494
James Harris
James Bellman
Hybridan LLP (Nominated Broker) +44 (0) 20 3764 2341
Claire Louise Noyce
Introduction
I am delighted to report the unaudited interim results for the Company and its
subsidiaries (together the "Group") for the six months ended 30 September 2024
(the "Period" or "H1 FY25").
Trading
The Group produced a strong set of results in the Period, which has also seen
continued investment in our operations with a view to supporting future
growth.
Revenue increased to £37.6m (H1 FY24: £36.9m), with strong performances
across our roofing, specialist building services and materials handling
operating divisions.
Gross margin increased to 23.8% (H1 FY24: 22.2%), due to a combination of
growth in higher-margin areas of the Group's businesses and continued careful
contract selection and management.
Following the planned increased investment in the Group's operations and
overhead base as detailed below, operating profit was £1.7m (H1 FY24:
£1.8m).
Earnings per share for the Period was 8.4p (H1 FY24: 6.7p). The Company
completed a return of capital to shareholders by way of a tender offer in the
prior period in December 2023, where the Company repurchased 5 million
ordinary shares for consideration of £3.1m, funded by an amortising term loan
with Virgin Money. This had a positive impact on earnings per share in the
Prior Period and the Period, and will continue to do so in the future.
Investment in operations
We have continued to invest in operations during the period, with a view to
generating future growth. This resulted in an increase in administrative
expenses in the period to £7.2m (H1 FY24: £6.4m).
This investment included a relocation of Isoler Limited ("Isoler") to new,
larger premises in Belmont, Co Durham, which accommodate an enhanced and
expanded training facility. Isoler has also commenced establishment of a
Southern delivery hub to support its ongoing national expansion programme.
We have also opened a new division of MGM Limited, which trades as Callisto
Glass Facades, and recruited a team to provide bespoke design, manufacture and
installation of architectural glass facades. This requires an upfront
investment in employees and overheads within the first year, following which
we expect a positive financial contribution from FY25 onwards.
We have also invested in Arcas Building Solutions Limited ("Arcas"), following
a challenging trading period in FY23, and spent much of FY24 refocusing the
business and making significant changes to the management team and internal
systems. Having recently appointed Michael Nesbit as Managing Director, we are
confident that Arcas is now in a strong position to progress. Michael has
secured some excellent contracts, including being appointed as lead contractor
for the refurbishment of a historic grade two listed building in Newcastle
City Centre, which should support trading for the rest of the financial year
and beyond.
Other commentary on trading
We have continued to support and invest in H Peel & Sons Limited ("H
Peel"), our construction solutions, refurbishment and fit-out business,
following a challenging few years. H Peel has historically served the
hospitality and leisure sector and has seen reduced customer demand post
COVID-19. We have concerns over the further impact on the sector of reduced
national insurance thresholds and minimum wage changes and, as a result, we
are closely monitoring performance in this business and are keeping its
long-term future under review.
Despite challenging market conditions, our materials handing business, Alcor
Handling Solutions Limited ("Alcor"), continues to perform well and, with
continued investment in the fleet over the period, we believe it is well
positioned for an upturn in market conditions, noting in particular the
potential impact of falling interest rates.
As in prior years, we have included a calculation of adjusted Operating
Profit, adjusted EBITDA, and adjusted earnings per share in notes 4 and 5 to
these interim results as supplemental measures of the Group's profitability,
in addition to the statutory measures defined under IFRS. The only adjusting
item to Operating Profit in the Period is for intangible assets amortisation
of £5,000 (H1 FY24: £6,000).
Cash flow and bank loans
The Group had a net bank debt position, based on cash balances of £1.4m less
the outstanding term loan balance of £2.8m, of £1.4m at 30 September 2024
(30 September 2023: net cash of £0.4m; 31 March 2024: net bank debt of
£2.2m).
During the Period, the Company paid an ordinary dividend of 2.0p per ordinary
share (H1 FY24: 2.0p). In the prior period a further special dividend of
1.0p per ordinary share was paid.
The amortising term loan with Virgin Money is repayable in equal quarterly
instalments over five years. Due to strong cash generation in the Period,
the Company has repaid a further £0.5m on the term loan in November 2024, in
addition to the scheduled £0.4m term loan and interest payments made in the
Period.
As we have emphasised in our prior results, our net cash (or net bank debt)
position represents a snapshot at a particular point in time and can move by
up to £1.5m 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 in the Period was £2.5m net bank debt, and the highest position in
the Period was £0.1m net bank debt, and the average was £1.5m net bank
debt.
People and Board changes
I am delighted to have the opportunity to lead Northern Bear as Chief
Executive Officer, having been appointed on 1 April 2024 following Keith
Soulsby's retirement.
We appointed Simon Carr CBE in July 2024 as the Company's Non-Executive
Chairman. Simon is a highly experienced individual with over 45 years'
experience in the construction industry, having sat on the board of both
private and public companies, and was previously the Managing Director of
Henry Boot Construction Limited and sat on the Executive Committee of Henry
Boot Plc. My colleagues and I would like to welcome Simon to the business
and look forward to benefiting from his extensive experience.
I would also like to thank Harry Samuel for acting as our interim
Non-Executive Chairman, pending Simon's appointment. Harry continues as a
Non-Executive Director of the Company.
Anil Khera stepped down from his role as Non-Executive Director in July 2024,
in order to provide the board with an appropriate balance between Executive
and Non-Executive Directors. The board would like to thank Anil for his hard
work and contribution to the Company and wishes him well for his future
endeavours.
The Company notes that Tom Hayes, who has served as Finance Director of
Northern Bear since February 2014, has stated his desire to leave the Group to
pursue another opportunity. Whilst no arrangements or agreements have yet
been finalised, it is expected that Tom will stand down as a Director of the
Company and its subsidiaries from 31 December 2024, remaining as an employee
of the Company until 31 March 2025. A further announcement in this regard
will be made in due course.
At subsidiary level, we promoted Josh Watson to joint Managing Director of
Isoler, alongside John Gilstin. Josh has been with Isoler for over ten years
and has played a key part in its commercial development and current growth
initiatives, including the opening of the Southern delivery hub.
We also recently promoted Michael Nesbit to Managing Director at Arcas as
previously mentioned. Michael joined the business in 2023 and has already
made a significant contribution, including securing several high-profile
contracts which should benefit trading in the coming months.
I would like to congratulate Josh and Michael on their promotions and look
forward to supporting them in their new roles.
In October 2024, the Company issued options over, in aggregate, 1,000,000
ordinary shares of 1p each under a Company Share Option plan, in order to
introduce equity incentives for our Executive team and subsidiary management.
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.
Outlook
As at the date of this report, the Group is trading in line with market
expectations and our forward order book remains strong.
Should current market conditions continue and the additional investment in our
operations meet expectations, the Group has the potential to trade ahead of
both prior year results and market expectations. This, of course, inter
alia, is subject to winter weather conditions, as in the prior year we saw
sustained heavy rainfall and a number of named storms which impacted on our
operations and trading performance in H2 FY24.
We will update shareholders on progress in the new year and prior to the
financial year-end.
Conclusion
Once again, I would like to thank all our employees for their hard work and
commitment, and our shareholders for their continued support.
John Davies
Chief Executive Officer
29 November 2024
Consolidated statement of comprehensive income
for the six month period ended 30 September 2024
6 months ended 6 months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 37,578 36,890 68,681
Cost of sales (28,638) (28,704) (52,811)
Gross profit 8,940 8,186 15,870
Other operating income 16 16 33
Administrative expenses (7,214) (6,449) (13,471)
Operating profit 1,742 1,753 2,432
Finance costs (206) (74) (294)
Profit before income tax 1,536 1,679 2,138
Income tax expense (385) (421) (514)
Profit for the period 1,151 1,258 1,624
Total comprehensive income attributable to equity holders of the parent 1,151 1,258 1,624
Earnings per share from continuing operations
Basic earnings per share 8.4p 6.7p 9.5p
Diluted earnings per share 8.4p 6.7p 9.5p
Consolidated balance sheet
at 30 September 2024
30 September 2024 30 September 2023 31 March
2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Property, plant and equipment 5,931 5,171 5,542
Right of use asset 1,278 1,565 1,371
Intangible assets 15,389 15,400 15,394
Trade and other receivables 1,003 983 899
Total non-current assets 23,601 23,119 23,206
Inventories 1,434 1,418 1,496
Trade and other receivables 14,143 13,964 13,667
Cash and cash equivalents 1,444 439 978
Total current assets 17,021 15,821 16,141
Total assets 40,622 38,940 39,347
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 6,070 8,195 5,194
Total equity attributable to equity holders of the Company 21,138 23,263 20,262
Liabilities
Loans and borrowings 2,100 - 2,450
Trade and other payables 47 55 28
Lease liabilities 1,214 1,484 1,239
Deferred tax liabilities 1,229 1,059 1,229
Total non-current liabilities 4,590 2,598 4,946
Loans and borrowings 747 50 764
Trade and other payables 12,573 11,690 12,305
Lease liabilities 728 709 724
Current tax payable 846 630 346
Total current liabilities 14,894 13,079 14,139
Total liabilities 19,484 15,677 19,085
Total equity and liabilities 40,622 38,940 39,347
Consolidated statement of changes in equity
for the six month period ended 30 September 2024
Share capital Capital redemption reserve Share premium Merger reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 190 6 5,169 9,703 7,499 22,567
Total comprehensive income for the period
Profit for the period - - - - 1,258 1,258
Transactions with owners, recorded directly in equity
Equity dividends paid - - - - (562) (562)
At 30 September 2023 190 6 5,169 9,703 8,195 23,263
At 1 April 2023 190 6 5,169 9,703 7,499 22,567
Total comprehensive income for the year
Profit for the year - - - - 1,624 1,624
Transactions with owners, recorded directly in equity
Exercise of share options - - - - 7 7
Return of capital to shareholders by way of tender offer - - - - (3,100) (3,100)
Equity dividends paid - - - - (836) (836)
At 31 March 2024 190 6 5,169 9,703 5,194 20,262
At 1 April 2024 190 6 5,169 9,703 5,194 20,262
Total comprehensive income for the period
Profit for the period - - - - 1,151 1,151
Transactions with owners, recorded directly in equity
Equity dividends paid - - - - (275) (275)
At 30 September 2024 190 6 5,169 9,703 6,070 21,138
Consolidated statement of cash flows
for the six month period ended 30 September 2024
6 months ended 6 months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Operating profit for the period 1,742 1,753 2,432
Adjustments for:
Depreciation of property, plant and equipment 478 420 896
Depreciation of lease asset 256 251 512
Amortisation 5 6 12
Loss on sale of property, plant and equipment (19) (22) (20)
2,462 2,408 3,832
Change in inventories 62 26 (52)
Change in trade and other receivables (580) (1,377) (996)
Change in trade and other payables 286 (2,316) (1,727)
Cash generated from/(used in) operations 2,230 (1,259) 1,057
Interest paid (166) (34) (189)
Tax received/(paid) 115 22 (185)
Net cash flow from operating activities 2,179 (1,271) 683
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 387 246 816
Acquisition of property, plant and equipment (1,020) (701) (2,000)
Net cash from investing activities (633) (455) (1,184)
Cash flows from financing activities
Issue of borrowings - 15 3,500
Repayment of borrowings (367) - (321)
Repayment of lease liabilities (438) (438) (921)
Proceeds from the exercise of share options - - 7
Return of capital to shareholders by way of tender offer - - (3,100)
Equity dividends paid (275) (562) (836)
Net cash from financing activities (1,080) (985) (1,671)
Net increase/(decrease) in cash and cash equivalents 466 (2,711) (2,172)
Cash and cash equivalents at start of period 978 3,150 3,150
Cash and cash equivalents at end of period 1,444 439 978
Notes
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 2024 Annual Report and Financial Statements. The financial information for the half years ended 30 September 2024 and 30 September 2023 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 2024 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 2024 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 2024 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 2024 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 2024, and will be adopted in
the 2025 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 2025 or are expected to be adopted and
effective at 31 March 2025.
New and amended standards and interpretations issued by the IASB that will
apply for the first time in the next annual financial statements include:
· Classification of Liabilities as Current or Non-Current,
Non-current Liabilities with Covenants: amendments to IAS 1 - effective date
on or after 1 January 2024
· Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) -
effective date on or after 1 January 2024
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 2024 is calculated
by applying the Directors' best estimate of the annual effective tax rate to
the profit for the period.
4. Alternative performance measures
The Group uses Adjusted Operating Profit, Adjusted EBITDA, and Adjusted
earnings per share as supplemental measures of the Group's profitability, in
addition to measures defined under IFRS. The directors consider these useful
due to the exclusion of specific items that could impact a comparison of the
Group's underlying profitability, and are aware that shareholders use these
measures to assist in evaluating performance.
The adjusting items for the alternative measures of profit are either
recurring but non-cash charges (amortisation of acquired intangible assets),
one-off non-cash items (impairment charges), or one-off exceptional items
(e.g., exceptional loss-making contracts in Arcas Building Solutions Limited
and tender offer costs).
Adjusted operating profit is calculated as below:
6 months ended 6 months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating profit (as reported) 1,742 1,753 2,432
Loss-making contracts in Arcas Building Solutions and tender offer costs - - 200
Amortisation of intangible assets arising on acquisitions 5 6 12
Adjusted profit for the period 1,747 1,759 2,644
Adjusted EBITDA is calculated as below:
6 months ended 6 months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
Adjusted operating profit (as above) 1,747 1,759 2,644
Depreciation of property, plant and equipment 478 420 896
Depreciation of lease asset 256 251 512
Adjusted EBITDA 2,481 2,430 4,052
Adjusted basic and diluted earnings per share is presented in note 5 below.
5. 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 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
Profit for the period (£'000) 1,151 1,258 1,624
13,750 18,725 17,118
Weighted average number of ordinary shares excluding shares held in treasury
for the proportion of the year held in treasury ('000)
Basic earnings per share 8.4p 6.7p 9.5p
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 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
Profit for the period (£'000) 1,151 1,258 1,624
13,750 18,725 17,118
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) 3 15 14
Diluted weighted average number of ordinary shares excluding shares held in 13,753 18,740 17,132
treasury for the proportion of the year held in treasury ('000)
Diluted earnings per share 8.4p 6.7p 9.5p
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 recurring but non-cash charges (amortisation of acquired
intangible assets), one-off non-cash items (impairment charges), or one-off
exceptional items (e.g. exceptional loss-making contracts in Arcas Building
Solutions Limited and tender offer 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 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
Profit for the period (£'000) 1,151 1,258 1,624
Loss-making contracts in Arcas Building Solutions and tender offer costs - - 200
Amortisation of intangible assets arising on acquisitions 5 6 12
Corporation tax effect of above items - - -
Adjusted profit for the period (£'000) 1,156 1,264 1,836
13,750 18,725 17,118
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 8.4p 6.8p 10.7p
Adjusted diluted earnings per share 8.4p 6.7p 10.7p
6. Finance costs
6 months ended 6 months ended Year ended
30 September 2024 30 September 2023 31 March 2024
Unaudited Unaudited Audited
£'000 £'000 £'000
On bank loans and overdrafts 148 34 201
Finance charges on lease liabilities 58 40 93
Total finance costs 206 74 294
7. 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 10 to 11, and 66
to 67 of our Annual Report and Financial Statements for the year ended 31
March 2024, which are available on the Company's website,
www.northernbearplc.com (http://www.northernbearplc.com) .
8. Half year report
The condensed financial statements were approved by the Board of Directors on
29 November 2024 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.
For and on behalf of the Board of Directors
Thomas Hayes
Finance Director
29 November 2024
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