Northern Bear Regulatory News (NTBR)

30 November 2017

Northern Bear plc

("Northern Bear" or the "Company")

Interim results for the six month period ended 30 September 2017

The board of directors of Northern Bear (the "Board") is pleased to announce its unaudited interim results for the Company and its subsidiaries (together the "Group") for the six months to 30 September 2017.

Highlights

· Revenue from continuing operations of £27.2 million (2016: £20.1 million)

· Adjusted profit before income tax* from continuing operations of £1.5 million (2016: £1.3 million)

· Reported profit before income tax from continuing operations of £1.3 million (2016: £1.3 million)

· Basic earnings per share from total operations of 5.9p (2016: 5.2p)

· Net bank debt of £0.6 million at 30 September 2017 (30 September 2016: £2.0 million)

* Adjusted for the impact of non-recurring transaction costs and amortisation of acquired intangibles

Steve Roberts, Executive Chairman of Northern Bear, commented:

"I am pleased to report that the Group has had another six months of strong operational performance. We also completed the acquisition of H Peel, our first acquisition for over nine years. With a strong order book, we are looking forward to the rest of our financial year with optimism and are confident that we will be able to maintain our progressive dividend policy."

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CHAIRMAN'S STATEMENT

Introduction

I am pleased to report the unaudited interim results for the six months ended 30 September 2017 for Northern Bear plc (the "Company") and its subsidiaries (together the "Group").

In our trading update, released on 7 November 2017, we announced that profit before tax from continuing operations would exceed last year's excellent results, before the impact of non-recurring transaction costs and amortisation of acquired intangibles relating to the acquisition of H Peel & Sons (Holdings) Limited ("H Peel") in July 2017.

Further to that update, I am pleased to confirm the Group's outstanding results for the period. After non-recurring transaction costs and amortisation, the Group generated retained profits from total operations of £1.1 million (2016: £0.9 million) and basic earnings per share of 5.9p (2016: 5.2p). This included a positive post-acquisition contribution from H Peel.

Trading

During the prior year to 31 March 2017, the Company disposed of Chirmarn Holdings Limited and its subsidiaries (together "Chirmarn"). Results from these companies have, accordingly, been presented as discontinued operations in the results for the prior period to 30 September 2016 and for the year to 31 March 2017.

Turnover from continuing operations for the period increased to £27.2 million (2016: £20.1 million). Much of the increase was attributable to a strong performance in our Specialist Building Services division, and to the inclusion of revenues generated by H Peel.

Gross profit from continuing operations increased to £5.0 million (2016: £4.5 million) while gross margin reduced to 18.4% (2016: 22.2%). The Group's Specialist Building Services division typically operates at lower margins than the Roofing and Materials Handling divisions and, hence, the reduction in gross margin is down to a change in sales mix in the period.

The Group continues to be careful in terms of contract selection. I am pleased to report that trading profits were in line or ahead of management expectations at every trading division during the period. This is testament to the hard work of our Group Managing Director, Graham Jennings, our Operations Director, Keith Soulsby, and all of the operational management team.

Administrative expenses, before transaction costs and amortisation, increased to £3.5 million (2016: £3.1 million). This was largely to support increased activity levels in the period. Operating profit, again, before transaction costs and amortisation, increased to £1.6 million (2016: £1.4 million).

Cash flow

Net bank debt at 30 September 2017 was £0.6 million (30 September 2016: £2.0 million net bank debt, 31 March 2017: £0.6 million net cash), which was in line with management expectations. The increase in debt from 31 March 2017 relates to both the H Peel acquisition and the payment in the period of last year's final ordinary and special dividends, which totalled £0.7 million (2016: £0.4 million).

Cash generated from operations was £0.9 million in the period (2016: £1.4 million), which was impacted by the reversal of some favourable working capital movements in the prior year.

As reported in April 2017, the Group recently negotiated a new revolving credit facility with Yorkshire Bank, which provided us with the flexibility to pursue acquisition opportunities. Following the H Peel acquisition, we extended this facility by a further £1 million (to £4.5 million). This will provide continued flexibility in this area.

Dividend

The Board has followed a progressive dividend policy in recent years, with continued increases in the final dividend and a special dividend for the year ended 31 March 2017.

Our stated policy is to pay only a final dividend. This is primarily due to the potential impact of exceptional, adverse weather on the Group's trading over the winter months. Provided that the strong trading performance continues for the remainder of the financial year, it is the intention of the Board to continue with our progressive dividend policy.

Strategy

I am delighted that the Group was able to complete the acquisition of H Peel in July 2017. H Peel is an interiors and fit-out business based in Dewsbury, West Yorkshire. It has a blue chip client base spread across the UK and operates primarily in the hotel and leisure sectors.

H Peel met all of our key acquisition criteria, which include a business that is well established in its sector, a consistent track record of profitability and cash generation and a strong management team who are committed to remaining with the business. The acquisition also provides the Group with further sectoral and geographical diversification. The team at H Peel have settled in well and we look forward to sharing in their continued success.

We continue to believe that acquisitions of established specialist building services businesses, either in the same or complementary sectors to our current operations, could further enhance the Group's offering to customers. Although we are presented with potential acquisitions on a regular basis, we will only proceed with such an acquisition opportunity where we are confident that it will meet our criteria, predictably enhance earnings and provide an acceptable return on investment for our shareholders.

Outlook

The Group currently has a high level of committed orders and the Directors are positive about the outlook for trading in the second half of the year, subject to there being no exceptional, adverse weather conditions over the period.

People

The Group's loyal, dedicated and skilled workforce, along with continued investment in training new operatives and apprenticeship schemes, is a key part of our success. Our operational strategy is to directly employ a large majority of the workforce and, with HR responsibilities overseen by Keith Soulsby, the Group continues to invest in training, regardless of short term economic conditions. This is particularly important, given the continued shortage of skilled operatives and cost pressures in our sector.

During the period we were notified by Graeme Tennick, the current Managing Director of A1 Industrial Trucks, our Materials Handling business, that he intends to retire from his role in March 2018. Graeme is co-founder of A1 and has remained with the business for almost ten years since it was acquired by the by the Group in April 2008. We have worked with Graeme to recruit a replacement who has held senior roles in national Materials Handling businesses and, subject to satisfactory performance, he will be appointed Managing Director of A1 on Graeme's retirement. I would like to thank Graeme and his co-founder Derek Wymes (who retired in summer 2016) for their hard work and contribution since joining the Group.

Conclusion

I am, yet again, delighted to be reporting on an excellent trading period and set of results. I would once more like to thank all of our employees for their hard work and contribution to another strong set of results for the Group.

Steve Roberts

Executive Chairman

Consolidated statement of comprehensive income

for the six month period ended 30 September 2017

Consolidated statement of changes in equity

for the six month period ended 30 September 2017

Consolidated balance sheet

at 30 September 2017

Consolidated statement of cash flows

for the six month period ended 30 September 2017

1. Basis of preparation

The consolidated interim financial information has been prepared in accordance with the accounting policies that are expected to be adopted in the Group's full financial statements for the year ending 31 March 2018 which are not expected to be significantly different to those set out in Notes 2 and 3 of the Group's audited financial statements for the year ended 31 March 2017, other than as disclosed in Note 2. These are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 31 March 2018 or are expected to be adopted and effective at 31 March 2018. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of this financial information.

The financial information in this statement relating to the six months ended 30 September 2017 and the six months ended 30 September 2016 has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.

The financial information for the year ended 31 March 2017 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2017 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for the year ended 31 March 2017 was i) unqualified, ii) did not include any 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.

2. Changes in accounting policies

From 1 April 2017 the following standards, amendments and interpretations became effective and were adopted by the Group:

§ Amendments to IAS 12 'Income Taxes' - Amendments to the recognition of deferred tax assets for unrealised losses;

§ Amendments to IAS 7 'Statement of Cash Flow' - Disclosure amendments;

§ Amendments to IAS 40 'Investment Property' for transfers of Investment Property; and

§ Annual Improvements to IFRS (2014 - 2016).

The adoption of the above has not had a significant impact on the Group's profit for the period or equity.

3. Taxation

The taxation charge for the six months ended 30 September 2017 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::

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:

All potential shares were anti-dilutive for discontinued operations in the year ended 31 March 2017 due to the loss reported.

5. Discontinued operations

During the year ended 31 March 2017, the Company disposed of its subsidiary Chirmarn Holdings Limited, along with its wholly owned subsidiaries Chirmarn Limited and Chirmarn (Surveying) Limited (together "Chirmarn"). Chirmarn's principal activities were asbestos removal and surveying services. The disposal was completed on 31 March 2017.

The results of the discontinued operations are included in the Group's consolidated financial information until the date the disposal was completed. These are as follows:

6. Acquisition of H Peel & Sons

On 25 July 2017 the Group acquired 100 per cent of the share capital of H Peel & Sons (Holdings) Limited, including its wholly owned subsidiary H Peel & Sons Limited (together "H Peel").

The initial value of purchase consideration recognised in the consolidated interim financial information is £2.3 million, which includes a combination of cash, shares and deferred consideration (an element of which is contingent) recorded at discounted present value. The total amount of intangible assets recognised in the balance sheet at 30 September 2017 is £3.2 million. These amounts represent the Directors' provisional estimates of fair values at the date of acquisition and will be finalised as part of the Group's year end reporting for the year to 31 March 2018.

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 9, and 55 to 58 of our Annual Report and Financial Statements for the year ended 31 March 2017, which are available on our website, www.northernbearplc.com.

8. Half year report

The condensed financial statements were approved by the Board of Directors on 30 November 2017 and are available on the Company's website, 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

30 November 2017

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.