Investor relations |
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Financial overview Chairman’s statement Introduction Despite a fall in turnover to £35.0 million (2009 £41.8 million), the Group has delivered operating profits before exceptional items of £1.7 million (2009 £3.7 million). Adjusted (pre-exceptional) earnings per share has fallen to 4.5p (2009 12.2p) and adjusted interest cover is 3.4 times (2009 5.0 times). Administrative expenses (including depreciation but excluding exceptional items) were reduced to £7.6 million (2009 £8.3 million), a fall of 9%, which reflects our robust response to the challenging trading conditions which prevailed throughout the period. Impairment charges, relating to acquired goodwill and asset write-downs, were £1.8 million (2009 £nil). Other exceptional items were £0.5 million (2009 £0.1 million) which included asset provisions, restructuring costs and costs associated with aborted acquisitions. After deducting exceptional expenses of £2.2m (2009: £0.1m) the loss for the year was £1.4m (2009: profit £2.2m) and a basic loss per share 7.2p (2009 earnings 11.2p) I believe that these results represent a strong performance in the context of the current economic climate, where the UK economy has just emerged from six successive quarters of negative growth and both the sector and geographic region in which we operate were particularly exposed to the downturn. Trading The effects of the financial crisis on our sector, which began in mid 2008, gathered momentum during 2009. Against this backdrop, we instigated a comprehensive range of measures to minimise the effect on the profitability of our businesses. These measures, which were taken very early in the cycle, have resulted in a significant reduction in our fixed cost base, while at the same time protected our market position and the quality of our services. These actions have enabled us to move forward again, as we begin to see the return of some stability and an upturn in certain areas of the business. The trading period was characterised by a sustained weakening of our end markets which continued until late summer 2009. As I reported in my Interim Statement in December 2009, we began to experience an increase in activity during the course of the autumn 2009, which gave us cause for cautious optimism. The extreme cold weather conditions and snow experienced in January and February 2010 resulted in particularly difficult trading during these months, however, we saw a significant improvement in activity during March. Cash flow Following an increase in our net debt in the first six months, cash generation was particularly strong in the second half of the financial year. Our net bank debt at the year end was less than £9 million, with facilities of £10.0 million. This reflects the focus our financial and operational teams place on cash management. In December 2009, we agreed new banking covenants, but as a result of our strong cash generation, the schedule of debt repayments was maintained. The Group’s bankers remain very supportive and this provides us with a solid financial foundation on which to continue building in 2010 and beyond. In addition, subsequent to the year end, we have recently paid our last tranche of vendor deferred consideration and our financial lease obligations are now less than £0.25 million. Risk management Risk management is an important priority on every project that we undertake, however small. The safety of our staff, clients and the general public is of paramount importance. We take this responsibility very seriously and ensure that all risks are properly assessed, then devise strategies to manage and minimise such risks. Our commitment to risk management has led to the creation of Northern Bear Safety, our fourteenth operating business. This is in line with our policy of identifying opportunities for organic growth. This business is led by Jason Harrison, the Managing Director and a Chartered Member of the Institute of Occupational Safety and Health (IOSH). Northern Bear Safety, as well as providing health and safety services to our Group companies, has an expanding portfolio of external clients. Since joining the Group, Jason and his team have driven up standards of health and safety significantly. Our number of accidents in 2009 was less than 40% of that in 2007. Further, our accident incident rate (AIR) was less than 56% of the national average for construction companies. Dividend The Board has decided that, since cash conservation is of prime importance, it is prudent to withhold the dividend but will look to reinstate it at the earliest possible opportunity. Board of Directors and Advisers We were delighted to welcome back Steve Roberts as Finance Director to the executive team during the year. Steve was the Finance Director at the time that Northern Bear’s shares were admitted to trading on AIM, subsequently converting to a non-executive role in 2007. Steve was instrumental in successfully concluding our revised banking covenants. The significant improvement in cash management is testament to the controls and procedures he and his team have introduced and implemented. Strand Hanson remains our nominated adviser and were joined by Seymour Pierce, as corporate broker, in January 2010. Outlook The new financial year has started well, with strong order books and a healthy pipeline both far exceeding the outlook at the corresponding time last year. Public spending cuts are inevitable; we must ensure that we are well placed to secure orders where they are available, on terms we find acceptable. To achieve this, the quality of our work must be of the highest possible standard in order to maintain our reputation, and we remain focussed on this goal. While we remain cautious about the overall economic environment, we feel the Group is well placed to take advantage of opportunities for its businesses as they arise. Acquisitions remain a key element of our long term growth strategy. We continue to look for quality companies with strong management teams that complement our existing businesses. For the foreseeable future, any acquisitions will be funded with a combination of vendor equity and from the Company’s own resources, without any recourse to additional bank debt. People The day to day management of our businesses remains fundamental to the success of the Group and this requires not only skill and experience, but also hard work and commitment. Our operational management team strive to satisfy our clients’ needs in terms of both quality and speed of service. This ensures we retain our trusted position with long term clients, and gives me considerable confidence for the future. I would like to thank all of our employees across the Group for their substantial efforts over the past 12 months and their contribution towards the Group’s trading performance.
6 July 2010 |
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