Preliminary results

Preliminary results for the year ended 31 March 2011

 

Highlights

 

·      Revenue from continuing operations £27.2m  (2010: £27.6m)

·      Operating profit (pre exceptional) from continuing operations £1.6m (2010: £1.7m)

·      Adjusted (pre exceptional) earnings per share from continuing operations 5.0p (2010: 5.0p)

·      Continued support of the bank as well as new funding streams for opportunities in the renewable energy sector

 

 

Howard Gold, Chairman of Northern Bear Plc commented:

 

“I believe that these results demonstrate the resilient nature of our businesses, as well as highlighting the Board’s continuing work to review the core focus of the Group and to identify and dispose of non-core, or under-performing businesses, in a timely fashion.

 

Following the disposal of three non-core businesses during the previous financial year, we now have a more streamlined group of businesses, wholly focused on the support services sector.

 

The new financial year has started well and we currently enjoy an order book which is healthier than at any time over the past two years.

We believe that as a group of businesses, we are very well positioned to take advantage of opportunities as they arise, particularly in the renewable energy sector.

 

We look forward to reporting on progress on our newly formed renewables business in the coming months.”

 

 

 

 

 

 

 

For further information contact:

 

Northern Bear PLC

Graham Forrest – Chief Executive Officer                                                                                +44 (0) 191 414 5486

 

Strand Hanson Limited

James Harris / James Spinney                                                                                                    +44 (0) 20 7409 3494

 

Seymour Pierce Limited

Katie Ratner / Paul Jewell / David Banks                                                                                 +44 (0) 20 7107 8000

 



Chairman’s statement

Introduction

 

I am pleased to report results for the year ended 31 March 2011.

 

Underlying profit before tax from continued operations (before exceptional items) was £1.1 million (2010: £1.2 million).  Net cash generated from operating activities has increased by 77% to £864,000 (2010: £488,000).

 

Basic earnings per share from continued operations were 3.4p (2010: 2.9p) whilst earnings per share before exceptional items were 5.0p (2010: 5.0p).

Exceptional items (from continued operations) were £309,000 (2010: £506,000), the majority of which were bad debts resulting from two customers becoming insolvent.

 

As stated in note 3 of the Financial Statements, three businesses have been disposed of since 31 March 2010 and these disposals have resulted in a loss from discontinued operations (net of income tax) of £856,000 (2010: loss £1,909,000).

 

I believe that these results demonstrate the resilient nature of our businesses, as well as highlighting the Board’s continuing work to review the core focus of the Group and to identify and dispose of non-core, or under-performing businesses, in a timely fashion.

 

Trading

 

The uncertain macroeconomic conditions have continued to dominate the trading environment for our businesses.  Both turnover and margins have remained broadly static during the past two financial years, reinforcing our view that there is no immediate prospect of a significant change in the current year.

 

The effects of HM Government’s Comprehensive Spending Review are beginning to feed through to our end-markets, whilst the continued lack of mortgage finance continues to depress the new build housing market.

 

In addition to the above, the crippling weather conditions in the North of England during December 2010 had a significant impact on the results during the second half of the year.

 

It is testament to the robustness of the Group’s businesses that it continued to generate both profit and positive cash flow during this difficult period.

 

Cash flow

 

The cash performance of the Group remains good, with a further reduction in net bank debt to £8.7 million (2010: £9.0 million).  In addition, the sale of Roof Truss Company in April 2011 resulted in a further reduction in borrowings of £400,000.

 

The Group’s bankers remain supportive and this provides us with the solid foundation needed to continue to move forward.



Risk management

 

We reported last year the creation of Northern Bear Safety Limited to provide health and safety services to external clients, as well as Group companies.

 

This business has maintained its growth during the period and our health and safety standards continue to improve.

 

Our number of reportable accidents during the period fell by 85% versus 2009 and our Accidents Incident Rate (AIR) fell by a further 50% versus the previous year.

 

We continue to look for avenues to grow this side of our business, never losing sight, however, of the overriding requirement to maintain the highest possible safety standards for our staff and clients.

 

Dividend

 

The Board has decided that it is prudent to withhold the payment of a dividend but will look to reinstate it at the earliest possible opportunity.

 

Board of Directors and Advisors

 

During the year, we have enjoyed a very stable team of both directors and advisors, with no changes. 

 

Keith Soulsby has indicated his desire to step down from the Board at the forthcoming AGM, to enable him to fully concentrate his efforts on the opportunities currently presenting themselves to Wensley Roofing, the business he founded and sold to Northern Bear in 2006.

 

On behalf of all his fellow Board members, I would like to put on record our most sincere gratitude to Keith for his efforts in the formative years of Northern Bear.  I look forward to him helping Wensley Roofing taking advantage of solar roofing opportunities and driving that business forward for many years to come.

 

Outlook

 

Following the disposal of three non-core businesses during the previous year, we now have a more streamlined group of businesses, wholly focused on the support services sector.

 

The new financial year has started well and we currently enjoy an order book which is healthier than at any time over the past two years.

 

In addition to the core businesses, we have formed two new businesses.

 

Northern Bear Building Services has been created to provide services to two principal markets; first as a reactive maintenance business for insurance clients and secondly, as a main contractor for sub-£3 million refurbishment and new build contracts.

 

Northern Bear (Renewables) Limited, has been created to provide photovoltaic systems (PV) to our existing client base.  As reported on 5th July 2011, we have entered into a funding arrangement with RGE and Hazel Capital.  This market, driven by the Feed in Tariff (FIT) scheme, is moving very quickly at present and we expect to make a further announcement on progress to Shareholders at the time of the forthcoming AGM.

 

The markets in which we operate continue to be characterised by depressed margins and little or no growth.  We feel it is essential for the future of our business to continue to identify and exploit opportunities to enable us to deliver growth and shareholder value. 

 

We believe that as a group of businesses, we are very well positioned to take advantage of these opportunities as they arise, particularly in the renewable energy sector.

 

Our priority is to improve earnings and cash flow to enable us to reduce our existing level of indebtedness.

 



People

 

Once again, the Board and Shareholders would like to thank all of our employees and sub-contractors for their continued commitment and energy.  They have faced many varied challenges during the past year and in all cases, a combination of experience and positive attitude have ensured the best result for the Group has been achieved.

 

 

 

 

HB Gold
Chairman

10 August 2011



Consolidated statement of comprehensive income

for the year ended 31 March 2011

2011

2010

Before
exceptional
items

Total

Before
exceptional
items

Exceptional
items

Total

£000

£000

£000

£000

£000

Continuing operations

Revenue

27,160

27,160

27,609

–

27,609

Cost of sales

(19,286)

(19,286)

(19,669)

–

(19,669)

Gross profit

7,874

7,874

7,940

–

7,940

Other income

20

20

22

–

22

Administrative expenses

  Share based payments

178

178

(60)

–

(60)

  Other administrative expenses

(6,426)

(6,735)

(6,183)

(506)

(6,689)

Operating profit/(loss)

1,646

1,337

1,719

(506)

1,213

Finance income

1

1

–

–

–

Finance expenses

(518)

–

(518)

(526)

–

(526)

Profit/(loss) before income tax

1,129

820

1,193

(506)

687

Income tax expense

(205)

(181)

(253)

114

(139)

Profit/(loss) from continuing

 operations

924

639

940

(392)

548

Discontinued operations

Loss from discontinued operation (net of  income tax)

(144)

(856)

(95)

(1,814)

(1,909)

Profit/(loss) for the year

780

(217)

845

(2,206)

(1,361)

Total comprehensive income

 attributable to equity

holders of the parent

(217)

(1,361)

Basic earnings/(loss) per share

–  continuing operations

3.4p

2.9p

–  discontinued operations

(4.6)p

(10.1)p

– total operations

(1.2)p

(7.2)p

Adjusted (pre-exceptional)

 earnings/(loss) per share

–  continuing operations

5.0p

5.0p

–  discontinued operations

(0.8)p

(0.5)p

– total operations

4.2p

4.5p



Consolidated statement of changes in equity

for the year ended 31 March 2011

Share
capital

Capital
redemption

Share
premium

Retained
earnings

Total
equity

£000

£000

£000

£000

£000

At 1 April 2009

190

–

5,169

3,330

21,275

Total comprehensive income for the year

Loss for the year

–

–

–

(1,361)

(1,361)

Transactions with owners, recognised

 directly in equity

Equity settled share based payment transactions

–

–

–

60

60

At 31 March 2010

190

–

5,169

2,029

19,974

At 1 April 2010

190

–

5,169

2,029

19,974

Total comprehensive income for the year

Loss for the year

–

–

–

(217)

(217)

Transactions with owners, recognised

 directly in equity

Equity settled share based payment transactions

–

–

–

(178)

(178)

Buy back of shares

(6)

6

–

(1,766)

(2,280)

Transfers in respect of discontinued operations

–

–

–

1,701

–

At 31 March 2011

184

6

5,169

1,569

17,299



Consolidated statement of financial position

at 31 March 2011

2011

2010

£000

£000

Assets

Property, plant and equipment

2,258

3,126

Intangible assets

21,348

23,623

Other investments

–

11

Total non-current assets

23,606

26,760

Inventories

851

916

Trade and other receivables

6,028

7,838

Prepayments for current assets

145

233

Cash and cash equivalents

281

355

Assets classified as held for sale

3,517

–

Total current assets

10,822

9,342

Total assets

34,428

36,102

Equity

Share capital

184

190

Capital redemption reserve

6

–

Share premium

5,169

5,169

Merger reserve

10,371

12,586

Retained earnings

1,569

2,029

Total equity attributable to equity holders of the company

17,299

19,974

Liabilities

Loans and borrowings

3,561

3,810

Deferred tax liabilities

103

62

Total non-current liabilities

3,664

3,872

Bank overdraft

4,782

4,327

Loans and borrowings

754

1,425

Trade and other payables

5,016

6,176

Current tax payable

275

278

Deferred consideration

–

50

Liabilities classified as held for sale

2,638

–

Total current liabilities

13,465

12,256

Total liabilities

17,129

16,128

Total equity and liabilities

34,428

36,102



Consolidated statement of cash flows

for the year ended 31 March 2011

2011

2010

£000

£000

Cash flows from operating activities

Loss for the year

(217)

(1,361)

Adjustments for:

Depreciation

562

566

Impairment

530

1,806

Finance income

(1)

–

Finance expense

518

531

Loss on sale of property, plant and equipment

8

60

Equity settled share-based payment transactions

(178)

60

Income tax expense

158

251

1,380

1,913

Change in inventories

(318)

(67)

Change in trade and other receivables

735

(356)

Change in prepayments

(9)

9

Change in trade and other payables

(281)

(65)

1,507

1,434

Interest received

1

–

Interest paid

(518)

(531)

Tax paid

(126)

(415)

Net cash from operating activities

864

488

Cash flows from investing activities

Proceeds from sale of property, plant and equipment

99

147

Acquisition of subsidiary, net of cash acquired

(50)

(400)

Disposal of subsidiary, net of cash disposed of

(9)

–

Acquisition of property, plant and equipment

(246)

(139)

Net cash from investing activities

(206)

(392)

Cash flows from financing activities

Repayment of borrowings

(955)

(1,064)

Payment of finance lease liabilities

(232)

(265)

Net cash from financing activities

(1,187)

(1,329)

Net decrease in cash and cash equivalents

(529)

(1,233)

Cash and cash equivalents at start of year

(3,972)

(2,739)

Cash and cash equivalents at end of year

(4,501)

(3,972)

 



Notes

1              Basis of preparation

The preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU (Adopted IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.  It does not include all the information required for full annual accounts.

2             Status of financial information

The financial information set out above does not constitute the Company’s statutory accounts for the years ended 31 March 2011 or 2010.  The financial information for 2010 is derived from the statutory accounts for 2010, which have been delivered to the Registrar of Companies.  The auditors have reported on the 2010 accounts; 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 statutory accounts for 2011 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 in due course.

The preliminary announcement is unaudited and has been prepared using the accounting policies published in the Group’s accounts for the year ended 31 March 2010, which are available on the Company’s websitewww.northern-bear.com with the exception of the following standards, amendments and interpretations which became effective during the year and were adopted by the Group:

·      Revised IFRS 3 Business combinations

·      Amendments to IAS27 Consolidated and separate financial statements

3             Discontinued operation

On 15 September 2010, the Group disposed of DJ McGough Limited through a buy back of shares.

 

At the year end management were committed to a plan to sell Hastie Limited and The Roof Truss Company (Northern) Limited, following a strategic decision to place greater focus on the Group’s core operations within changing market conditions.  Subsequent to the year end, on 20 April 2011 and 26 May 2011, the Group disposed of Hastie Limited and The Roof Truss Company (Northern) Limited respectively.

 

These operations were not discontinued or classified as held for sale at 31 March 2010, and the comparative statement of comprehensive income has been represented to show the discontinued operations separately from continuing operations.



Results from discontinued operations – 2011

 DJ McGough

Hastie

Roof
Truss

2011

Total

£000

£000

£000

£000

Revenue

479

2,523

1,551

4,553

Expenses

(568)

(2,624)

(1,528)

(4,720)

Exceptional expenses

(50)

(470)

(192)

(712)

Loss before income tax

(139)

(571)

(169)

(879)

Income tax

26

(2)

(1)

23

Loss for the year

(113)

(573)

(170)

(856)

Basic loss per share

(4.6)p

Adjusted (pre exceptional) loss per share

(0.8)p

 

Results from discontinued operations – 2010

 DJ McGough

Hastie

Roof
Truss

2010

Total

£000

£000

£000

£000

Revenue

3,197

3,128

1,050

7,375

Expenses

(3,116)

(3,187)

(1,055)

(7,358)

Exceptional expenses

–

(8)

(1,806)

(1,814)

Profit/(loss) before income tax

81

(67)

(1,811)

(1,797)

Income tax

(112)

3

(3)

(112)

Loss for the year

(31)

(64)

(1,814)

(1,909)

Basic loss per share

(10.1)p

Adjusted (pre exceptional) loss per share

(0.5)p



Effect of disposal on financial position of the Group

 DJ McGough

Hastie

Roof

Truss

£000

£000

£000

Property, plant and equipment

89

58

658

Investments

–

–

11

Inventories

97

10

108

Trade and other receivables

398

358

318

Prepayments for current assets

31

17

26

Cash and cash equivalents

9

–

–

Loans and borrowings

(4)

(7)

(16)

Trade and other payables

(226)

(467)

(186)

Current tax payable

21

–

(5)

Deferred tax liabilities

(5)

5

(11)

Net assets and liabilities

410

(26)

903

Consideration received, satisfied in cash

–

Cash disposed of

(9)

Net cash outflow

(9)

 

 

4             Exceptional items

Administrative expenses include the following exceptional expenses:

 

2011

2010

£000

£000

Continuing operations

Trade receivable provisions

280

161

Aborted transaction costs

29

107

Restructuring

–

238

309

506

Discontinued operations

Impairment goodwill

405

1,641

Impairment property

125

165

Net asset impairment

91

8

Legal fees

91

–

712

1,814

 

 



5              Earnings/(loss) per share

The calculation of basic earnings/(loss) per share was based on the profit/(loss) for the period and on the weighted average number of ordinary shares outstanding, calculated as follows:

2011

2010

Profit/(loss) for the period (£000)  –  continuing operations

639

548

–  discontinued operations

(856)

(1,909)

–  total

(217)

(1,361)

Weighted average number of ordinary shares (‘000)

18,663

18,967

Earnings/(loss) per share                  – continuing operations

3.4p

2.9p

–  discontinued operations

(4.6)p

(10.1)p

–  total

(1.2)p

(7.2)p

Share options in issue do not have a dilutive impact on the earnings/(loss) per share calculation.

The calculation of adjusted earnings per share was based on the profit/(loss) for the period, adjusted for exceptional charges, and on the weighted average number of ordinary shares outstanding, calculated as follows:

2011

2010

Profit for the year (£000) – continuing operations

639

548

Exceptional expenses

285

392

Profit for the year before exceptionals (£000) – continuing operations

924

940

Loss for the year (£000) – discontinued operations

(856)

(1,909)

Exceptional expenses

712

1,814

Loss for the year before exceptionals (£000) – discontinued operations

(144)

(95)

Loss for the year (£000) – total

(217)

(1,361)

Exceptional expenses

997

2,206

Profit for the year before exceptionals – total

780

845

Weighted average number of ordinary shares

18,663

18,967

Adjusted earnings/(loss) per share – continuing operations

5.0p

5.0p

–        discontinued operations

(0.8)p

(0.5)p

–        total

4.2p

4.5p



6              Principal risks and uncertainties

The nature of the building services industry means that the Group is subject to a number of risk factors.  Some of these factors apply to the building services industry generally, while others are specific to the Group’s activities within that market.

Identification of acquisitions

The Group’s long term growth is partly dependent upon the identification and subsequent acquisition of suitable businesses.  The Group continues to commit resources to the research, identification and appropriate due diligence in respect of potential acquisitions.  Failure to identify, acquire and integrate any such businesses could adversely affect the long term growth of the Group.

Sector demand

The Group currently consists of businesses which all operate in three main segments of the building services sector of the economy.  The Group is therefore exposed to varying activity levels within these diverse industries.  Whilst the exposure of the Group to the new house build sector is less than 10% of Group turnover, our exposure to public sector markets is far greater.  Consequently, any material reduction in Government expenditure programmes, particularly in social housing, will have an adverse effect on the financial position of the Group.

Competition

Some of the businesses within the Group have competitors who, as a result of their funding structure, may be able to accept lower financial returns than that required by the Group.  Competition within these companies could adversely affect the Group’s profitability and financial position.

Key clients

There can be no guarantee that the Group’s key clients will not change suppliers.  While each of the Group’s businesses has many longstanding relationships with a number of key customers, the failure to satisfy the needs of these customers could harm the Group’s business.  Furthermore, these customers may be facing challenges within their own businesses.

Dependence on personnel

The Group continues to be dependent on the continued services of its senior management.  Retaining qualified personnel, consultants and advisors is important to the continued successful operation of the Group’s business.  There can be no assurance that the Group will be able to recruit or retain its personnel in the future which could have an adverse effect upon the Group’s business and financial position.  The loss of any of the Group’s senior personnel could impede the achievement of its objectives.

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