Northern Bear : Unaudited Interim Report 2022

25 November 2022

Northern Bear plc

("Northern Bear" or the "Company")

Interim results for the six month period ended 30 September 2022

The board of directors of Northern Bear (the "Board") is pleased to announce the unaudited interim results for the Company and its subsidiaries (together the "Group") for the six months to 30 September 2022.

Financial Summary

• • Revenue of £34.0m (H1 FY22: £30.0m)
  • Adjusted operating profit* of £1.5m (H1 FY22: £1.5m)
  • Net bank debt of £1.9m at 30 September 2022
  • Settlement of legal claim against Springs Roofing Limited, as previously announced on 8 July 2022
  • Strong order book supportive of trading for the remainder of the financial year
• stated prior to the impact of amortisation

Jeff Baryshnik, Non-Executive Chairman of Northern Bear, commented:

"We are pleased to announce solid operating results for the period despite significant inflationary headwinds. The Group enjoys a strong order book, so we are well positioned for the remainder of the financial year."

For further information please contact:
Northern Bear plc
Jeff Baryshnik - Non-Executive Chairman	[phone]
Tom Hayes - Finance Director	[phone]
Strand Hanson Limited (Nominated Adviser and Broker)	[phone]
James Harris
James Bellman

Northern Bear plc

Interim Report

30 September 2022

Contents

Advisers	2
Chairman's statement	3
Consolidated statement of comprehensive income	5
Consolidated balance sheet	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	8
Notes	9

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Advisers

Auditor	Nominated Adviser and Broker
Saffery Champness LLP	Strand Hanson Limited
Mitre House	26 Mount Row
North Park Road	London
Harrogate	W1K 3SQ
HG1 5RX

Bankers	Registrar
Virgin Money plc	Link Group
94-96 Briggate	10th Floor
Leeds	Central Square
LS1 6NP	29 Wellington Street
	Leeds
	LS1 4DL

Legal advisers	Registered office
Mincoffs Solicitors LLP	A1 Grainger
5 Osborne Terrace	Prestwick Park
Jesmond	Prestwick
Newcastle upon Tyne	Newcastle upon Tyne
NE2 1SQ	NE20 9SJ

2

Chairman's statement

Introduction

I am pleased to report the unaudited interim results for the six months ended 30 September 2022 (the "Period", "H1 FY23") for Northern Bear plc (the "Company" and, together with its subsidiaries, the "Group").

I am pleased to confirm the Group's results for the Period, with adjusted operating profit (stated prior to the impact of amortisation) of £1.5m (H1 FY22: £1.5m) and diluted earnings per share of 6.0p (H1 FY22: 6.1p).

In our last Annual Report and Accounts published in July 2022, we noted the continued industry-wide challenges with respect to both availability and price inflation of construction materials. There also have been well-publicised challenges in relation to attracting and retaining employees in the construction industry. Despite the impact of these headwinds on our businesses, our Group generated solid operating results whilst further investing in the Group's businesses.

Trading

Despite industry-wide challenges, our Group companies generated strong results in aggregate during the Period. Our companies have strong and well-established supplier relationships and have been able, on the whole, to work with our robust supply chain to ensure continuity of supply for contracts. Additionally, we have not experienced any slowdown in business to date despite widely publicised concerns about rising interest rates and their potential effects on construction generally and the housing market more specifically.

Revenue for the Period was £34.0m (H1 FY22: £30.0m) and, through the greater economy of scale from higher revenues along with continued careful contract selection and execution, gross margins were increased to 20.7% (H1 FY22: 19.5%).

However, administrative expenses increased to £5.6m (H1 FY22: £4.5m) in large part due to increases in payroll, motor and fuel expenses, insurance costs, and general cost inflation. The payroll increase relates primarily to the recruitment of additional commercial and operational staff, in particular at MGM and Isoler, both of which have performed strongly in recent years and are businesses where we see further opportunities for profitable growth.

Overall profit before income tax for the Period was £1.4m (H1 FY22: £1.4m) and diluted earnings per share

was 6.0p (H1 FY2022: 6.1p).

Cash flow

Net bank debt at 30 September 2022 was £1.9m (30 September 2021: £0.6m net cash, 31 March 2022: £2.2m net cash).

We had stated in the 2022 annual results that the cash position at 31 March 2022 reflected some favourable working capital swings which, to an extent, would be expected to reverse post year-end. This was the case, and the current customer and contract mix, along with increased turnover levels, has created an increased working capital requirement which reduced the cash balance during the Period.

As we announced in July 2022, one of the Company's subsidiaries, Springs Roofing Limited ("Springs"), settled a claim by Engie Regeneration (FHM) Limited for £0.6 million, which also impacted the Group's consolidated cash balances. The claim related to roofing work undertaken between April 2009 and March 2011 on seven care home properties. The Springs directors believed that the claim was without merit and this position was supported by third-party technical expert and legal advice. In reaching the agreed settlement set out above, Springs considered the management time commitment, the legal costs and the commercial risk of continued litigation. Springs, and the wider Group, retain excellent commercial relationships with Engie (now known as Equans), which continues to be an important and valued customer. The settlement was satisfied from the Group's existing cash resources in August 2022 and was previously recorded as an exceptional item in the Group's annual results to March 2022.

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