Last checked at 13 Jul 2015 07:00
13 July 2015
Northern Bear PLC
("Northern Bear" or the "Company")
Preliminary results for the year ended 31 March 2015
The board of directors of Northern Bear (the "Board") is pleased to announce its preliminary results for the year ended 31 March 2015.
Highlights
· Profit before tax of £1.9m (2014: £1.8m)
· Basic earnings per share 8.5p (2014: 7.6p)
· Cash generated from operations £2.4m (2014: £2.1m)
· Net bank debt decreased to £4.8m (2014: £5.6m)
· Final dividend of 1.5p per share proposed (2014: 0.75p)
Steve Roberts, Executive Chairman of Northern Bear commented:
"The year ended 31 March 2015 saw further strong performance across our businesses, which is testament to the hard work of our staff. Whilst continuing to reward shareholders through dividend payments and further reducing bank debt, the Group remains well placed to take advantage of acquisition opportunities as and when they arise."
For further information contact:
Northern Bear PLC Steve Roberts - Executive Chairman Tom Hayes - Finance Director
| +44 (0) 166 182 0369 +44 (0) 166 182 0369 |
Strand Hanson Limited (Nominated Adviser and Broker) James Harris James Spinney James Bellman | +44 (0) 20 7409 3494 |
Chairman's Statement
Introduction
I am pleased to report the Group's results for the year to 31 March 2015.
The Group has delivered another strong performance, with profit for the year of £1.5m (2014: £1.3m) and basic earnings per share of 8.5p (2014: 7.6p).
Trading
Trading during the year again exceeded internal management forecasts and prior year results, despite the impact of exceptional and non-recurring items referred to below.
The Group's revenue increased to £41.7m (2014: £36.8m) and its gross profit also increased to £9.8m (2014: £9.2m). Turnover growth has been achieved, at varying levels, across the Group. Given the Group structure, the level of growth in individual companies will cause variations in the gross margin percentage as a result of the Group sales mix.
Operating profit increased to £2.5m (2014: £2.2m) despite the impact of the exceptional bad debt of £259,000 referred to below. Profit before tax for the year was £1.9m (2014: £1.8m) after the impact of the write off of unamortised bank facility fees. The Group successfully controlled its administrative overheads in the year despite the significant growth in turnover. Whilst Group turnover increased by 13.4 per cent, administrative expenses, excluding the exceptional bad debt and share-based payment, increased by only 1.3 per cent.
Exceptional bad debt
As stated in the Company's trading update released on 15 June 2015, Tony Nygate and Graham Newton of BDO LLP were appointed as Administrators of GB Building Solutions Limited ("GB Building Solutions") on 9 March 2015. The Group had an exposure of £259,000 and this has been fully provided for in these results as an exceptional item in administrative expenses. It is hoped that the Group will generate additional work in relation to the completion of the projects for which GB Building Solutions were previously responsible.
Despite operating in a difficult sector in recent years, Northern Bear has an impressive record in terms of minimising bad debts, despite some well publicised failures in the sector in which it operates.
Bank facilities and fees
Historically, directly attributable bank fees were amortised over the life of the term loans to which they related. Having assessed the impact of the bank facility renewal described below, the Group considers that the terms of bank facilities have been substantially modified and accordingly has written off all relevant unamortised fees. This resulted in a non-recurring charge to finance costs in the year of £239,000. This is a non cash item as the fees had already been paid and will, together with the interest reduction referred to below, result in a substantial annual saving in finance costs in future years.
Cash flow
Net bank debt at 31 March 2015 was £4.8m (2014: £5.6m). The strategy of bank debt reduction has been maintained through the year, supported by the Group's strong trading performance, which led to cash generated from operations of £2.4m (2014: £2.1m). The Group took the opportunity to invest in its fixed asset base during the year whilst taking advantage of increased tax allowances, with capital expenditure of £0.7m (2014: £0.4m).
As previously announced, the Group's bank facilities were renewed on 7 April 2014 and the maturity profile of bank debt was improved through the renewal process. Facilities were again renewed and renegotiated on 31 March 2015. As part of this renegotiation, the margin on all bank debt was reduced by 1 per cent to LIBOR plus 3.25 per cent.
The Group is grateful for the continued support of Yorkshire Bank.
Dividend
In view of the strong trading performance and reduced net bank debt, I am pleased to announce that the Board proposes the payment of an increased final dividend of 1.5p per share (2014: 0.75p per share) for the year ended 31 March 2015. This is subject to shareholder approval at the Annual General Meeting to be held on 24 August 2015 and, if approved, will be payable on 28 August 2015 to shareholders on the register at 7 August 2015.
Operational matters
The Group has recently undertaken a project to streamline its operations, with Northern Bear Building Services Limited, MGM Limited ("MGM") and Northern Bear Safety Limited being integrated into new offices at Team Valley Trading Estate in Gateshead. Other businesses will also be moved to these new premises shortly. This strategy has already resulted in operational efficiencies and the opportunity to make significant overhead reductions is already being reflected in current trading figures.
As part of the integration of office facilities, Neil Jukes has been appointed as Managing Director of MGM in addition to his role as Managing Director of Northern Bear Building Services Limited. Neil has done an excellent job in growing Northern Bear Building Services from a new venture in 2011 to a business making an important contribution to the Group's results. I am confident that he is the right candidate to take control at MGM.
From a Health and Safety perspective, the office moves have been of great benefit to the Group. They have enabled Northern Bear Safety to establish a Construction Industry Trading Board ("CITB") approved training centre which will provide benefits to the Group's employees as well as all of our external Northern Bear Safety customers.
Outlook
The Board's priority in recent years, even whilst trading conditions have been challenging, has been to use operating cash flow to reduce bank debt levels. Whilst this remains our overall priority, we will continue to monitor opportunities for other uses of funds generated, including capital investment, bolt-on acquisitions and capital repurchases.
Current order book levels remain very strong across the Group and the new financial year has started well. Whilst there was a downturn in project commencement pending the outcome of the recent UK General Election, the Company was well positioned to capitalise on future work irrespective of the outcome of that election. The Group has announced a number of new projects in recent weeks, including Newcastle's Seven Stories refurbishment, Pele Tower in Corbridge and Percy Road in Whitley Bay.
People
I believe that our strategy of directly employing the majority of our workforce throughout a period of difficult economic conditions, along with continued investment in training new operatives, has been one of the key reasons for the Group's improved performance over the past two financial years. We have maintained a loyal, dedicated and skilled workforce and this has provided us with the capacity and capability to support increased trading levels now that sector demand has improved.
The quality and experience of our people and the key customer relationships that they maintain remain fundamental to the Group's success. I would again like to thank all of our employees for their contribution to the Group's results.
Steve Roberts
Executive Chairman
13 July 2015
Consolidated statement of comprehensive income
for the year ended 31 March 2015
2015 | 2014 | |||
£000 | £000 | |||
Revenue | 41,723 | 36,781 | ||
Cost of sales | (31,897) | (27,542) | ||
Gross profit | 9,826 | 9,239 | ||
Other operating income | 17 | 20 | ||
Administrative expenses | ||||
Exceptional expenses | (259) | - | ||
Share based payment | (13) | (1) | ||
Other administrative expenses | (7,116) | (7,025) | ||
(7,388) | (7,026) | |||
Operating profit | 2,455 | 2,233 | ||
Finance income | 8 | 21 | ||
Finance costs | ||||
Non-recurring finance costs | (239) | - | ||
Other finance costs | (361) | (502) | ||
(600) | (502) | |||
Profit before income tax | 1,863 | 1,752 | ||
Income tax expense | (355) | (417) | ||
Profit for the year | 1,508 | 1,335 | ||
Total comprehensive income attributable to equity holders of the parent | 1,508 | 1,335 | ||
Earnings per share from continuing operations | ||||
Basic earnings per share | 8.5p | 7.6p | ||
Diluted earnings per share | 8.4p | 7.5p | ||
Basic adjusted (pre exceptional and non-recurring expenses) earnings per share | 10.8p | 7.6p | ||
Diluted adjusted (pre exceptional and non-recurring expenses) earnings per share | 10.7p | 7.5p |
Consolidated statement of changes in equity
for the year ended 31 March 2015
Sharecapital | Capital redemption | Sharepremium | Mergerreserve | Retainedearnings | Totalequity | ||
£000 | £000 | £000 | £000 | £000 | £000 | ||
At 1 April 2013 |
184 |
6 |
5,169 |
10,371 |
2,604 |
18,334 | |
Total comprehensive income for the year | |||||||
Profit for the year | - | - | - | - | 1,335 | 1,335 | |
Transactions with owners, recorded directly in equity | |||||||
Equity settled share-based payment transactions |
- |
- |
- |
- |
1 |
1 | |
At 31 March 2014 |
184 |
6 |
5,169 |
10,371 |
3,940 |
19,670 | |
At 1 April 2014 | 184 | 6 | 5,169 | 10,371 | 3,940 | 19,670 | |
Total comprehensive income for the year | |||||||
Profit for the year | - | - | - | - | 1,508 | 1,508 | |
Transactions with owners, recorded directly in equity | |||||||
Equity settled share-based payment transactions |
- |
- |
- |
- |
13 |
13 | |
Equity dividends paid | - | - | - | - | (133) | (133) | |
At 31 March 2015 |
184 |
6 |
5,169 |
10,371 |
5,328 |
21,058 | |
Consolidated balance sheet
at 31 March 2015
2015 | 2014 | |||
£000 | £000 | |||
Assets | ||||
Property, plant and equipment | 2,702 | 2,530 | ||
Intangible assets | 21,353 | 21,355 | ||
Total non-current assets | 24,055 | 23,885 | ||
| ||||
Inventories | 849 | 831 | ||
Trade and other receivables | 9,746 | 9,151 | ||
Prepayments | 223 | 169 | ||
Deferred consideration receivable | 143 | 166 | ||
Cash and cash equivalents | 502 | 111 | ||
Total current assets | 11,463 | 10,428 | ||
Total assets |
35,518 |
34,313 | ||
Equity | ||||
Share capital | 184 | 184 | ||
Capital redemption reserve | 6 | 6 | ||
Share premium | 5,169 | 5,169 | ||
Merger reserve | 10,371 | 10,371 | ||
Retained earnings | 5,328 | 3,940 | ||
Total equity attributable to equity holders of the Company |
21,058 |
19,670 | ||
Liabilities | ||||
Loans and borrowings | 4,599 | 1,039 | ||
Deferred tax liabilities | 140 | 66 | ||
Total non-current liabilities | 4,739 | 1,105 | ||
Bank overdraft |
- |
3,664 | ||
Loans and borrowings | 1,049 | 1,169 | ||
Trade and other payables | 8,368 | 8,261 | ||
Current tax payable | 304 | 444 | ||
Total current liabilities | 9,721 | 13,538 | ||
Total liabilities |
14,460 |
14,643 | ||
Total equity and liabilities |
35,518 |
34,313 | ||
Consolidated statement of cash flows
for the year ended 31 March 2015
2015 | 2014 | |||
£000 | £000 | |||
Cash flows from operating activities | ||||
Operating profit for the year | 2,455 | 2,233 | ||
Adjustments for: | ||||
Depreciation | 521 | 496 | ||
Amortisation | 2 | 2 | ||
Loss on sale of property, plant and equipment | 2 | 16 | ||
Equity settled share-based payment transactions | 13 | 1 | ||
2,993 | 2,748 | |||
Change in inventories |
(18) |
(116) | ||
Change in trade and other receivables | (595) | (1,695) | ||
Change in prepayments | (54) | (26) | ||
Change in trade and other payables | 107 | 1,151 | ||
Cash generated from operations
| 2,433 | 2,062 | ||
Interest received | 8 | 21 | ||
Interest paid | (361) | (433) | ||
Tax paid | (421) | (97) | ||
Net cash flow from operating activities | 1,659 | 1,553 | ||
Cash flows from investing activities | ||||
Proceeds from sale of property, plant and equipment | 219 | 147 | ||
Proceeds from subsidiary disposal | 23 | 31 | ||
Acquisition of property, plant and equipment | (705) | (436) | ||
Net cash from investing activities | (463) | (258) | ||
Cash flows from financing activities | ||||
Increase in bank loans on re-financing of overdraft | 4,213 | - | ||
Repayment of borrowings | (989) | (564) | ||
Repayment of finance lease liabilities | (232) | (244) | ||
Equity dividends paid | (133) | |||
Net cash from financing activities | 2,859 | (808) | ||
Net increase in cash and cash equivalents |
4,055 |
487 | ||
Cash and cash equivalents at start of year | (3,553) | (4,040) | ||
Cash and cash equivalents at end of year | 502 | (3,553) |
Notes
1 Basis of preparation
This announcement has been prepared in accordance with the Company's accounting policies, which in turn are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission. The accounting policies comply with each IFRS that is mandatory for accounting periods ended 31 March 2015.
2 Status of financial information
The financial information set out above does not constitute the Company's financial statements for the years ended 31 March 2015 or 2014.
The financial information for the year ended 31 March 2014 is derived from the financial statements for that year, which have been delivered to the Registrar of Companies. The auditor has reported on the 2014 financial statements; 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 financial statements for 2015 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 following the Company's Annual General Meeting. The results are unaudited, however we do not expect there to be any difference between the numbers presented and those within the annual report.
3 Earnings per share
Basic earnings per share is the profit for the year divided by the weighted average number of ordinary shares outstanding, excluding those in treasury, calculated as follows:
2015 | 2014 | ||
Profit for the year (£000) | 1,508 | 1,335 | |
Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000) |
17,670 |
17,670 | |
Basic earnings per share | 8.5p | 7.6p |
The calculation of diluted earnings per share is the profit for the year 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:
2015 | 2014 | ||
Profit for the year (£000) | 1,508 | 1,335 | |
Weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000) |
17,670 |
17,670 | |
Effect of potential dilutive ordinary shares ('000) | 207 | 90 | |
Diluted weighted average number of ordinary shares excluding shares held in treasury for the proportion of the year held in treasury ('000) |
17,877 |
17,760 | |
Diluted earnings per share | 8.4p | 7.5p |
The calculation of basic adjusted (pre exceptional and non-recurring expenses) earnings per share is the profit for the year, adjusted for exceptional and non-recurring charges, divided by the weighted average number of ordinary shares outstanding above. Adjusted earnings is calculated as follows:
2015 | 2014 | ||
Profit for the year (£000) | 1,508 | 1,335 | |
Exceptional and non-recurring expenses (£000) | 403 | - | |
Profit for the year before exceptional and non-recurring expenses (£000) | 1,911 | 1,335 | |
Basic adjusted (pre exceptional and non-recurring expenses) earnings per share | 10.8p | 7.6p |
The calculation of diluted adjusted (pre exceptional and non-recurring expenses) earnings per share is calculated as the profit for the year, adjusted for exceptional and non-recurring expenses, divided by the diluted weighted average number of ordinary shares outstanding, both of which are as calculated above, giving rise to a diluted adjusted (pre exceptional and non-recurring expenses) earnings per share of 10.7p (2014: 7.5p).
Exceptional and non-recurring expenses comprise both exceptional expenses included within administrative expenses and non-recurring finance costs included within finance costs, net of corporation tax at the Group's effective tax rate.
4 Finance income and costs
2015 £'000 | 2014 £'000 | ||
Finance income | |||
Bank interest | 8 | 21 | |
Finance costs | |||
On bank loans and overdrafts | 345 | 341 | |
Finance charges payable in respect of finance leases and hire purchase contracts | 16 | 28 | |
Amortisation of transaction costs included in borrowings | - | 133 | |
Non-recurring write off of unamortised transaction costs included in borrowings | 239 | - | |
600 | 502 |
5 Availability of financial statements
The Group's Annual Report and Financial Statements for the year ended 31 March 2015 are expected to be approved by 24 July 2015 and will be posted to shareholders during the week commencing 27 July 2015. Further copies will be available to download on the Company's website at: http://www.northernbearplc.com/. It is intended that the Annual General Meeting will take place at the Company's registered office, A1 Grainger, Prestwick Park, Prestwick, Newcastle upon Tyne, NE20 9SJ, at 9.00am on 24 August 2015.