Northern Bear Regulatory News (NTBR)

31 March 2020

Northern Bear plc

("Northern Bear" or the "Company")

Trading Update

The board of directors of Northern Bear (the "Board") hereby provides an update on trading for the Company and its subsidiaries (together the "Group") for the year ending 31 March 2020 ("FY20"), the impact of the COVID-19 pandemic on the Group and related actions being taken, and the renewal of the Group's bank facilities.

Trading update

When we reported our interim results on 25 November 2019, we stated that the strong momentum in the three months ended 30 September 2019 ("Q2") had continued into the second half of the financial year and we considered the outlook for FY20 to remain positive. 

In December 2019 and January 2020, despite wet and windy weather conditions, the Group continued to trade well and broadly in line with our prior year comparatives, which themselves represented exceptional results for the Group. Unfortunately, the severe weather in February, where we experienced three major storms in the UK and the wettest month on record, had a significant impact on our ability to work on construction and roofing projects. This was extremely frustrating as we had, and continue to have, an excellent order book across the Group and were expecting another good finish to a financial year.

Trading in March 2020 began well, but, over the last two weeks, the majority of the Group has now been impacted by site closures related to the COVID-19 pandemic. We comment further on this below.

The last two months of the financial year are usually an important period and ordinarily account for a significant proportion of the Group's full year profits. 

The Board's current expectation is that operating profit for FY20, stated before amortisation and other adjustments (in the format used in our FY19 results), will be in the range of £2.2m to £2.3m as reported, or approximately £2.3m to £2.4m if including a full year's effect of the recent acquisition of Lister Holdings (York) Limited ("J Lister") announced in January 2020 (FY19: £3.2m as reported). This estimate is subject to finalisation of our audited results for FY20 and is before the additional benefit of £0.25m of consideration regarding the 2017 acquisition that will not be payable, partially offset by one-off costs related to the J Lister acquisition and the recent tender offer and Board changes.

In light of the contract delays in the first three months of this financial year (which were referred to when we reported our interim results in November 2019), the effects of the political uncertainty surrounding both Brexit and the General Election in December, the wet Winter which culminated in the storms of February and the impact of COVID-19, we are satisfied with the expected outturn. 

The audited results for FY20 will, for the first time, include adjustments in relation to the adoption of IFRS 16 "Leases", which requires operating leases to be recorded on the balance sheet, with right-of-use assets representing the right to use the underlying asset and lease liabilities denoting the obligation to make lease payments. These adjustments will not have a material impact on the reported level of profitability.

New bank facilities

We are pleased to announce that our existing £3.5m revolving credit facility with Yorkshire Bank, which was due for renewal in May 2020, has been renewed both ahead of schedule and on slightly better terms than those previously in place. This provides us with working capital facilities committed to May 2023. In addition, we also retain a £1m overdraft facility, which is renewable annually.

The Group currently has significant headroom in these facilities, despite the payment of £0.75m as initial consideration for the acquisition of J Lister in January 2020 and the settlement of FY19 corporation tax liabilities in December 2019.

COVID-19

The Company was admitted to trading on AIM in 2006, but the majority of businesses in our Group were established well before then. On average, our businesses, excluding those established by us following our listing, were founded 40 years ago. As such, most have significant expertise in managing through challenging periods in the construction industry, including in the early 1990s and the late 2000s.

We feel confident that we have a robust group of specialist construction businesses, run by an outstanding team of people and with a workforce that is second to none.

Although circumstances are changing daily, the majority of our businesses have seen construction sites close and expect to have limited work opportunities until the sites reopen. Due to differing prevailing conditions, we are managing the situation on a company by company basis. Each business' Managing Director has produced a plan to be implemented as work levels continue to reduce as a result of site closures. These plans include using the Coronavirus Job Retention Scheme to temporarily furlough affected employees and keeping a tight control over the remaining cost base and cash outflows.

Our employees are the foundation of our success, and the Board's priorities are to retain them and, by following Government guidance on operating safely, to protect them. When this guidance recommends reopening non-essential sites, we will resume activities across the remainder of the Group. 

In the meantime, we currently have a very strong order book and whilst the timing of the roll out of this work has been impacted by current events, we look forward to a return to a more normal level of operating performance across the Group once sites re-open. In addition, we retain an excellent relationship with Yorkshire Bank, as evidenced by the renewal and improvement of our bank facilities despite the uncertain environment in which we are currently operating, and with our major shareholders. 

Steve Roberts, Executive Chairman of Northern Bear, commented:

"We are pleased to be announcing a solid expected outturn for FY20, despite the prevailing circumstances across the financial year.

"Whilst we are currently operating in difficult times, given our very strong order book, we feel we are in an excellent position to achieve a sustained period of good profitability once the current health crisis has abated. In the meantime, we will continue to micromanage the Group on a daily basis and monitor the constantly changing landscape."

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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.