Northern Bear #NTBR

 Northern Bear
#NTBR


Buys -Not bought
Average -
Currently -48p-50p
Target – 100p
Timeframe – by mid december

Current Mcap -£8.66mill

What do they do?
Northern Bear family of businesses provides specialist building services to local authorities, housing associations, NHS trusts, universities, construction companies and national house builders throughout northern england. 
 

The Northern Bear group includes 12 businesses with an excellent reputation for delivering specialist building and support services in Northern England.  Clients include local authorities, housing associations, NHS trusts, universities, construction companies and national house builders.
Each company operates as an autonomous business, with Northern Bear providing the additional security of group strategic management and financial consolidation. All of the companies continue to be managed by key personnel who helped them become established and profitable businesses.
Services provided by the Northern Bear group of companies include

• Asbestos management
• Building services
• Roofing services
• Solar PV installations
• Fire protection
• Forklift truck supply and maintenance
• Health and safety training and consultancy
• Unmanned aerial imagery

source http://www.northernbearplc.com/building-services/

Past performance

	£ Millions	£ Millions	£ Millions	£ Millions	£ Millions
Income Statement	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Revenue	41.72	36.78	35.15	36.41	27.16
Operating Profit / Loss	2.46	2.23	1.08	1.47	1.34
Net Interest	(0.35)	0.02	(0.40)	(0.45)	(0.52)
Pre tax Profit	1.86	1.75	0.68	1.02	0.82
Post tax Profit	1.51	1.33	0.49	0.72	0.64
Profit for the Period	1.51	1.34	0.49	0.56	(0.22)
Equity Holders of Parent Company	1.51	1.34	0.49	0.56	(0.22)
Minority Interests	n/a	n/a	n/a	n/a	n/a
Continuing EPS
Earnings per Share (Basic)	8.50p	7.60p	2.70p	4.00p	3.40p
Earnings per Share (Diluted)	8.40p	7.50p	2.70p	4.00p	3.40p
Earnings per Share (Adjusted)	10.80p	7.60p	5.50p	4.80p	5.00p

	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Operating Margin	5.88%	6.07%	3.08%	4.04%	4.92%
Return on Capital Employed	40.34%	40.70%	28.04%	35.26%	25.96%
Dividend Cover	7.20	10.13	n/a	n/a	n/a
Dividend Yield	3.30%	2.20%	n/a	n/a	n/a
PE Ratio	4.20	4.50	2.50	2.40	2.50
PEG	0.10	0.10	0.20	n/a	n/a
Dividend per Share Growth	100.00%	n/a	n/a	n/a	n/a
Net Asset Value per Share	(1.67p)	(9.54p)	(17.11p)	(19.73p)	(22.91p)

Investment case
Im sure you get the gist by now. I like these companies that have growing revenues and profits but sit at a very low PE for whatever reason. 

NTBR does have debt but they are reducing it in a comendable way if you ask me. It is systematically being reduced every year as follows.

End of 2011: £8.4M
End of 2012: £7.0M
End of 2013: £6.4M
End of 2014: £5.6M
End of 2015: £4.8M

The chairman comments on the debt "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"

The 2015 profit figures would have been higher but for exceptional bad debt defaulted of £259k. The businesses have been streamlined and new integrated offices moved into. In the EOY results they say "this strategy has already resulted in operational efficiencies and the opportunity to make significant overhead reductions is already being reflected in current trading figures"

Also from the EOY "current order book levels remain very strong across the Group and the new financial year has started well"
Perhaps the best indicator of a nice profits boost comes from the website and says "It has been a successful summer period so far, with various projects being completed within the University and Northern Bear Building Services are on for a record breaking summer, completing 19 school, college and university projects" - Record breaking doesnt sound like any profit warning is about to land. Record breaking sounds like the PE is going to be getting even smaller.

An old chairman Jon Pither has been selling recently but still holds 14.4%and current BoD own 25% collectively.

It is hard to consider what my wholesale price is here looking at the charts. The SP has came off somewhat from all time highs and there does seem to be good support at 50p level which is now breaking. I think buying as close to 40p as possible is ideal.

Bear case
Well there is still debt desipte how it is managed. The old chairman may still be a seller in the market. The chairman also states "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". Now just because they have so far out performed the sector this is still the possibility of regression to the mean and more bad debt and exceptional losses for the next results. The building trade isnt doing very well currently and house builders have took a bit of a hit.
 
Comms with the company
Interims are November - confirmed Northern Bear building Services had a record period but this is just 1 of 10 companies in the group.

Summary 
I like this. Profits on the up and current PE only 5.7. They have had a record summer (part of the business) so you would imagine profits and revenue are again on the up pushing the PE at current mcap even lower. If Jon Pither isnt going to dump his load at the first sign of volume this has the potential to re rate to the 100p level (or £1 if you will) and beyond. Support seemed to be about 50p but wholesale would be as close to 40p as you can get it

Disclaimer
Clearly dont just buy based on my recommendation or anyone elses. Do your own reseach. Pick an entry you are happy with, pick a target exit you think is achiveable. This share may go up and down quite a bit before the target catalyst. The target catalyst may not be as good as hope resulting in an AIM sell off with decent losses if your entry is wrong.


Decision
Im going to watch and wait. If a sell off gets the SP to near 40p then its a stonking buy in my opinion.