A copy of Northern Bear plc’s latest financial results can be accessed here.
Chairman’s Statement – Financial Results
I am pleased to report the results for the year to 31 March 2017 for Northern Bear and its subsidiaries (together “the Group”).
The Group’s continuing operations delivered an outstanding year’s trading, with profit before tax and earnings per share from continuing operations ahead of strong prior year results.
As a result of strong cash generation during the year we are delighted to report a positive net cash position at 31 March 2017 of £0.6m (31 March 2016: net bank debt of £2.5m). Given that the Group had a reported net bank debt position of £10.1m at 30 September 2009 during the most severe recession to hit the building services industry that any of our operational staff can recall, it is testament to our current management team that we have been able to deleverage the balance sheet to this extent.
I would like to thank Yorkshire Bank for their continued support over this period. We have recently agreed new and more flexible bank facilities with them which are discussed further below.
During the year, we made the decision to dispose of Chirmarn Holdings Limited and its subsidiaries (together “Chirmarn”). The sale completed on 31 March 2017. Results from these companies have, accordingly, been presented as discontinued operations in results for both the current and prior year. In the current year, discontinued operations also include a loss on book value on disposal of Chirmarn and a non-cash write down of associated goodwill.
Following a relatively mild winter and continued strong performance in the Group’s Roofing division, along with continued careful contract selection and management, turnover from continuing operations increased to £45.6m (2016: £34.7m) and gross profit was £9.3m (2016: £8.2m)
The Group’s administrative expenses increased to £6.8m (2016: £6.1m), largely due to operating costs associated with higher trading levels. As a result, operating profit from continuing operations for the year increased to £2.5m (2016: £2.0m).
The results also benefited from reduced finance costs due to lower bank debt levels. Overall profit before tax from continuing operations increased to £2.4m (2016: £1.8m) and basic earnings per share from continuing operations was 11.3p (2016: 7.9p)
Cash flow and new bank facilities
The Group’s cash generated from all operations was £4.5m (2016: £3.7m), following the strong trading performance and some continued favourable payment terms on contract work. However, an element of this may reverse in due course depending on the ongoing mix of contracts.
Our investment in the Group’s fixed asset base continued during the year, with capital expenditure of £0.7m (2016: £0.8m).
During the year we signed a new £3.5m revolving credit facility agreement with Yorkshire Bank to replace the previous term loan facility (which was due for renewal on 31 March 2017). This new facility is committed to 31 May 2020 and was secured at a reduced interest rate level, reflecting the strength of the Group’s recent and ongoing financial performance. The Group also retains a £1.0m committed overdraft facility.
The new facilities will provide the Group with a much more flexible funding structure and permit a wider range of options for capital allocation in the future.
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 2.5p per share (2016: 2.0p per share) for the year ended 31 March 2017. This is subject to shareholder approval at the Annual General Meeting to be held on 24 August 2017 and, if approved, will be payable on 01 September 2017 to shareholders on the register at 11 August 2017.
Due to the exceptional financial performance in the year and the Group’s net cash position at 31 March 2017, we have decided to distribute funds which are surplus to our strategic requirements. Accordingly, we are also announcing a special dividend of 1.5p per share (2016: nil), which is also subject to shareholder approval and payable as above.
The Board will continue to assess the dividend levels and our current 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, debt obligations and the macro-economic environment at the relevant time.
We have moved into the new financial year with a particularly strong order book for the time of year which provides optimism for what we hope will be another good set of results for the year ending 31 March 2018.
We continue to be presented with a number of acquisition opportunities and believe that making a small number of acquisitions of specialist building services businesses could further enhance the Group’s service offering to customers. However, as previously stated, we will only execute an acquisition where we are confident that it will broaden the Group’s service offering, predictably enhance earnings and provide an attractive return on investment for our shareholders.
On 31 March 2017 the Group disposed of its subsidiary, Chirmarn Holdings Limited. This followed a detailed review by the Board of the entire Chirmarn operation.
Chirmarn provides asbestos removal and surveying services. It had made a substantial contribution to the Group’s performance since acquisition in 2007. It also traded exceptionally well during the severe recession which began in 2008. However, during the financial year ended 31 March 2017, Chirmarn was trading at a loss and required continued funding from the Group.
The Board provided all possible resource and support during that period in an attempt to improve matters, however, the situation persisted, with no certainty that there would be any improvement in the business activities of Chirmarn in the short to medium term. Futhermore, the sector in which Chirmarn operates differs from those in which other Group companies operate in that asbestos, for health and safety reasons, has not been widely used as a construction material for some time and, therefore, we believe there is limited potential for a long term market growth.
As a result, the Board decided that the disposal of Chirmarn was in the best interest of shareholders and will allow the Board to focus on the Group’s core businesses and markets.
I remain proud that the Group directly employs a large majority of its workforce. Overseen by Keith Soulsby, the Group has continued to invest in training new operatives throughout difficult economic times. In more buoyant times, this has proved to be particularly important given the shortage of skilled operatives and cost pressures in our sector. As a result of our long term strategy, we have retained a loyal, dedicated and skilled workforce. That workforce, along with investment in apprenticeship schemes, is a key part of the Group’s continued success.
I am delighted to be able to report such a positive set of results, and I would once again like to thank all our employees for their hard work and contribution to another period of strong performance for the Group.
24 July 2017