29 November 2023

Northern Bear plc

("Northern Bear" or the "Company")

Interim results for the six month period ended 30 September 2023

Northern Bear (LSE:NTBR), the AIM quoted holding company of the group of companies providing specialist building and support services headquartered in Northern England and serving customers across the UK, is pleased to announce the unaudited interim results for the Company and its subsidiaries (together the "Group") for the six months to 30 September 2023 (the "Period" or "H1 FY24").

Financial Summary

·      Revenue of £36.9m, representing an increase of 8.7% (H1 FY23: £34.0m)

·      Operating profit of £1.8m*, representing an increase of 20.9% (H1 FY23: £1.5m)

·      Profit for the period up 11.6% to £1.3m (H1 FY23: £1.1m)

·      Basic earnings per share up 11.7% to 6.7p (H1 FY23: 6.0p)

·      Net cash of £0.4m as at 30 September 2023 (30 September 2022: £1.9m net bank debt; 31 March 2023: £3.2m net cash)

·      Equity dividends paid of £0.6m in the Period (H1 FY23: £nil)

·      Post period end: return of capital of approximately £3.1m by way of tender offer for 5 million Ordinary Shares at a fixed price of 62p per Ordinary Share, expected to complete in December 2023, and updated upon separately today via RNS.

Operational and commercial summary

·      The Board of Directors of Northern Bear (the "Board") is pleased with the Group's performance during the Period, with revenue and profits in line with management's expectations and ahead of strong prior year results.

·      Site activity levels remained high despite the ongoing macro-economic challenges and their related impact on the construction industry.

·      The results in the Period are testament to the hard work and commitment of the Group's employee base.

Outlook

·      The Group has traded well during the first half of FY24 and has the potential to trade ahead of strong prior year results should this level of performance continue. 

·      At this stage, the Board confirms that the Group is trading in line with market expectations. 

·      Our forward order book remains strong and should support our trading performance in the coming months. 

* No material adjustments to reported operating profit in the Period or H1 FY23

Harry Samuel, Non-Executive Chairman of Northern Bear, commented:

"Notwithstanding the challenging macro-economic environment, the Group's performance has been strong during the Period and beyond, with a robust pipeline of new business opportunities supported by the continued efforts of our dedicated workforce."

For further information please contact:

Introduction

I am delighted to report the unaudited interim results for the Company and its subsidiaries (together the "Group") for the six months ended 30 September 2023 (the "Period" or "H1 FY24").

These results represent a significant improvement on what were considered very strong results in the prior period ended 30 September 2022 (the "Prior Period" or "H1 FY23), and are testament to the hard work and commitment of the Group's employee base. 

Trading

Despite ongoing macro-economic challenges and their related impact on the construction industry, our site activity levels remained high during the Period across our Group of companies.  This led to revenue in the Period increasing by 8.7% to £36.9m (H1 FY23: £34.0m). 

Gross margin increased to 22.2% (H1 FY23: 20.7%) through both greater economies of scale from higher revenues and continued careful contract selection and execution.  This was offset to an extent by administrative expenses increasing to £6.4m from £5.6m to support the higher revenue levels.  

All of our Roofing, Specialist Building Services, and Materials Handling divisions made positive trading contributions during the Period. 

As reported in our results for the financial year ended 31 March 2023 ("FY23"), Arcas Building Solutions undertook a small number of contracts under prior management where significant trading losses were incurred totalling £733,000 (including a provision for losses through to completion).  John Davies was appointed as Managing Director at Arcas in April 2023 and has since made significant commercial, management, and systems' improvements to the business.  I am pleased to report that Arcas traded profitably in the Period. 

As in prior years, we have included a calculation of adjusted Operating Profit, adjusted EBITDA, and adjusted earnings per share in note 4 to these interim results as supplemental measures of the Group's profitability, in addition to the statutory measures defined under IFRS.  The only adjusting item to Operating Profit in the Period and Prior Period is for amortisation of £6,000. 

Cash flows

The Group had a net cash position, defined as cash balances less the amount drawn down on our revolving credit facility, of £0.4m at 30 September 2023 (30 September 2022: net bank debt of £1.9m; 31 March 2023: net cash of £3.2m).  As in prior years, the financial year-end balance is usually a high point reflecting favourable working capital movements, and excess cash balances would be expected to normalise post year-end. 

During the Period. the Company paid an ordinary dividend of 2.0p per ordinary share (H1 FY23: nil) and a further special dividend of 1.0p per ordinary share (H1 FY23: nil), providing a return of capital to shareholders of £0.6m (H1 FY23: £nil). 

As we have emphasised in prior results, our net cash (or net bank debt) position represents a snapshot at a particular point in time and can move by up to £1.5m in a matter of days, given the nature, size and variety of contracts that we work on and the related working capital balances. The lowest position in the Period was £0.7m net bank debt, and the highest position in the Period was £3.3m net cash, and the average was £0.7m net cash. 

Tender offer and new bank facilities

On 23 October 2023, we announced a return of capital of up to £3.1m by way of Tender Offer to shareholders for up to 5 million Ordinary Shares at a fixed price of 62 pence per Ordinary Share.  This was approved by shareholders at a General Meeting on 15 November 2023; further to this we announced this morning that the Tender Offer was fully subscribed, and it is expected to complete on or around 8 December 2023. 

The return of capital of £3.1m, plus associated costs, will be funded using both existing cash resources and an increase of £1.0m to the Group's existing debt facilities of £4.5m from Clydesdale Bank plc (trading as Virgin Money). We had previously stated that costs and expenses related to the Tender Offer were not expected to exceed an aggregate of £0.4 million inclusive of VAT.  While the final amount will only be confirmed following conclusion of the Tender Offer, our current expectation is that the final costs and expenses will be closer to £0.2m. 

Outlook

As at the date of this report, the Board confirms that the Group is trading in line with management's expectations and that our forward order book remains strong.  

The timing of Group turnover and profitability is, however, difficult to predict, and our results are subject to monthly variability. In addition, whilst on site activity levels have been encouraging, overall Group performance is dependent on a number of factors outside of management's control, including macro-economic factors and their impact on the construction industry, any prolonged spells of severe weather, supply-chain and construction materials availability, and ongoing challenges with attracting and retaining employees within the construction industry.

Notwithstanding the inherent uncertainties associated with our industry, the Group has made an excellent start to FY24 and has the potential to trade ahead of strong prior year results should the current level of performance continue. 

People and Board changes

As announced following the conclusion of the General Meeting on 15 November 2023, Jeff Baryshnik resigned from his role as Non-Executive Chairman and as a director of the Company with immediate effect. The board would like to thank Jeff for his service as a director of the Company.

I have assumed the position of Interim Non-Executive Chairman, having previously been a Non-Executive Director, until such time as the Board has identified and appointed a permanent successor.

Martin Boden joined the Board as a Non-Executive Director on 13 September 2023.  I am pleased to welcome Martin, who brings strong public markets experience to the Board. 

As always, our loyal, dedicated, and skilled workforce is a key part of our success and we make every effort to support them, including through continued training and health and safety compliance. 

Conclusion

Once again, I would like to thank all our employees for their hard work and commitment, and our shareholders for their continued support. 

Harry Samuel

Non-Executive Chairman

29 November 2023

Consolidated statement of comprehensive income

for the six month period ended 30 September 2023

Consolidated balance sheet

at 30 September 2023

Consolidated statement of changes in equity

for the six month period ended 30 September 2023

Consolidated statement of cash flows

for the six month period ended 30 September 2023