Newcastle-upon-Tyne-based building services firm Northern Bear plans to use its regional presence as a way of encouraging local authorities to use its services.
Chief executive Graham Forrest will use the argument that the local economy will get more benefit from using businesses that are based in the area rather than larger companies that are based elsewhere in the UK. Forrest hopes to take work off larger firms such as Mears.
Results for the year to March 2010 were better than house broker Seymour Pierce expected. Underlying profit still declined from £3.08m to £1.27m on revenues 16% lower at £35m.
The company’s fork lift rental and fire protection businesses are doing particularly well at the moment.
Seymour Pierce forecasts a profit of £1.4m for 2010-11 but there is room for upgrades if current trading continues to improve.
Net debt was flat at £9.2m at the end of March 2010 but some customers have been slow in paying. Loan repayments of £1m a year should be within the company’s ability. The main bank facility is due for renewal in September. Steve Roberts has taken on the role of finance director.
Forrest says that he wants to reinstate the dividend when the company’s profit reaches £2m.
Northern Bear is still keen to make acquisitions once the share price rises so it is easier to fund the purchases. Forrest would prefer to issue shares at nearer to 40p a share. He says that there is little competition for acquisitions at the moment but it is difficult to find mature targets with the consistent profitability that he seeks.
The valuation multiple that the company will pay has been cut from three times pre-tax profit to 2.5 times pre-tax profit. Around one-fifth of the purchase price will be dependent on future performance.
On top of that some of the smaller, non-core businesses will be sold back to management.
At 25p a share, Northern Bear is valued at £4.69m.
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