Northern Bear EBITDA dropped on 18.6% in 2016 and EBITDA Margin decreased slightly on 0.54 pp from 7.8% to 7.2%

11 Jul 2016 • About Northern Bear ($NTBR) • By InTwits

Northern Bear reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is relatively stable: 7.2% in FY2016 vs. 7.8% in FY2015 vs. 5.9% in FY2012
Northern Bear has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.3%. At the same time it's in pair with industry average of 2.1%.
CAPEX is quite volatile: 0.81 in FY2016, 0.71 in FY2015, 0.44 in FY2014, 0.23 in FY2013, 0.18 in FY2012
The company has business model with low profitability: ROIC is at 7.8%
It operates with high leverage: Net Debt/EBITDA is 1.1x while industry average is 0.9x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Northern Bear ($NTBR) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	36.412	35.147	36.781	41.723	36.466	-12.6%
Gross Profit	8.313	8.162	9.239	9.826	8.924	-9.2%
SG&A			7.025	7.116	6.830	-4.0%
EBITDA	2.158	2.223	2.731	3.239	2.635	-18.6%
Net Income	0.563	0.487	1.335	1.508	1.454	-3.6%
Balance Sheet
Cash	0.243	0.202	0.111	0.502	1.898	278.1%
Short Term Debt	5.191	5.162	4.833	1.049	4.607	339.2%
Long Term Debt	2.470	1.692	1.039	4.599	0.119	-97.4%
Cash flow
Capex	0.181	0.228	0.436	0.705	0.813	15.3%
Ratios
Revenue growth	34.1%	-3.5%	4.6%	13.4%	-12.6%
EBITDA growth	-2.3%	3.0%	22.9%	18.6%	-18.6%
Gross Margin	22.8%	23.2%	25.1%	23.6%	24.5%	0.9%
EBITDA Margin	5.9%	6.3%	7.4%	7.8%	7.2%	-0.5%
Net Income Margin	1.5%	1.4%	3.6%	3.6%	4.0%	0.4%
SG&A, % of revenue			19.1%	17.1%	18.7%	1.7%
CAPEX, % of revenue	0.5%	0.6%	1.2%	1.7%	2.2%	0.5%
ROIC	6.4%	6.8%	8.8%	10.4%	7.8%	-2.6%
ROE	3.2%	2.7%	7.0%	7.4%	6.7%	-0.7%
Net Debt/EBITDA	3.4x	3.0x	2.1x	1.6x	1.1x	-0.5x

Revenue and profitability

The company's Revenue dropped on 12.6% in FY2016. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased slightly on 0.54 pp from 7.8% to 7.2% in FY2016.

Gross Margin increased slightly on 0.92 pp from 23.6% to 24.5% in FY2016. SG&A as a % of Revenue increased slightly on 1.7 pp from 17.1% to 18.7% in FY2016.

Net Income marign showed almost no change in FY2016.

Capital expenditures (CAPEX) and working capital investments

In FY2016 the company had CAPEX/Revenue of 2.2%. Northern Bear showed small growth in CAPEX/Revenue of 1.6 pp from 0.65% in FY2013 to 2.2% in FY2016. For the last three years the average CAPEX/Revenue was 1.7%.

Return on investment

The company operates at low ROIC (7.79%) and ROE (6.71%). ROIC decreased on 2.6 pp from 10.4% to 7.8% in FY2016. ROE decreased slightly on 0.69 pp from 7.4% to 6.7% in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.1x and Debt / EBITDA is 1.8x. Net Debt / EBITDA dropped on 0.5x from 1.6x to 1.1x in FY2016. Debt dropped on 16.3% in FY2016 while cash surged on 278% in FY2016.

Valuation

The company's trades at EV/EBITDA 4.0x and P/E 5.4x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 5.8x with the industry average at 19.0x.

Appendix 1: Peers in Support Services

Below we provide Northern Bear benchmarking against other companies in Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Camco Clean Energy ($CCE)		88.0%	-54.7%	99.4%
Optimal Payments ($OPAY)	39.9%	41.5%	44.0%	68.1%
Inspired Energy ($INSE)	83.8%	44.8%	42.2%	40.2%
21St Century Technology ($C21)	0.1%	-22.8%	-16.6%	35.5%
Ibex Global Solutions ($IBEX)	7.4%	35.7%	30.0%	29.8%
Median (55 companies)	4.9%	8.0%	5.0%	6.6%	1.3%
Northern Bear ($NTBR)		-3.5%	4.6%	13.4%	-12.6%

Top companies by Gross margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Inspired Energy ($INSE)	94.6%	86.8%	78.7%	76.2%
Ienergizer Ltd ($IBPO)	56.2%	78.4%	76.8%	72.7%	71.3%
Grafenia ($GRA)	53.4%	54.3%	56.1%	70.8%	66.3%
Vianet Group ($VNET)	53.3%	51.3%	58.8%	69.2%	70.1%
Prime People ($PRP)	63.4%	58.3%	57.7%	61.4%	59.2%
Median (49 companies)	29.5%	28.8%	30.4%	28.7%	34.0%
Northern Bear ($NTBR)	22.8%	23.2%	25.1%	23.6%	24.5%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	13.4%	-0.2%	36.0%	44.8%
Northgate ($67GX)	41.2%	40.4%	40.6%	39.4%	38.3%
Inspired Energy ($INSE)	46.2%	48.5%	1.5%	35.4%
Vianet Group ($VNET)	18.6%	17.3%	19.7%	27.1%	22.1%
Vp ($VP.)	23.9%	24.5%	24.2%	26.2%	28.4%
Median (55 companies)	6.8%	6.4%	6.8%	6.9%	9.6%
Northern Bear ($NTBR)	5.9%	6.3%	7.4%	7.8%	7.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Vp ($VP.)	21.4%	17.7%	21.6%	25.7%	24.1%
Sagentia Group ($SAG)	1.9%	1.4%	1.5%	25.2%
Nature Group ($NGR)	14.3%	7.2%	5.6%	22.9%
Augean ($AUG)	9.8%	15.9%	12.3%	12.3%
Falkland Islands Hldgs ($FKL)	3.7%	6.8%	12.9%	11.9%	4.8%
Median (55 companies)	1.1%	1.1%	1.0%	1.0%	1.2%
Northern Bear ($NTBR)	0.5%	0.6%	1.2%	1.7%	2.2%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
21St Century Technology ($C21)	20.3%	-2.9%	45.6%	111.0%
Inspired Energy ($INSE)	63.9%	65.5%	-7.5%	28.0%
Petards Group ($PEG)	35.5%	-78.0%	24.7%	23.9%
Servoca ($SVCA)	1.0%	7.8%	14.9%	22.3%
Rtc Group ($RTC)	14.6%	17.6%	19.9%	22.2%
Median (55 companies)	9.9%	7.9%	9.4%	10.2%	10.5%
Northern Bear ($NTBR)	6.4%	6.8%	8.8%	10.4%	7.8%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Redhall Group ($RHL)	22.8x	5.8x	6.6x	16.8x
Mitsubishi Corp ($MBC)	9.9x	15.9x	14.3x	12.5x	25.0x
Ienergizer Ltd ($IBPO)	6.3x	2.8x	3.0x	4.0x	2.4x
Ceps ($CEPS)		3.0x	6.6x	3.8x
Kellan Group(The ($KLN)			6.5x	3.6x
Median (51 companies)	0.8x	0.5x	0.6x	0.4x	-0.0x
Northern Bear ($NTBR)	3.4x	3.0x	2.1x	1.6x	1.1x

Northern Bear stock price chart

Northern Bear financials

mln.	FY2010	FY2011	FY2012

Revenue	27.609	27.160	36.412
EBITDA	2.285	2.208	2.158
Net income	0.436	-0.217	0.563
CAPEX	0.139	0.246	0.181
Debt	9.562	9.097	7.661
Cash	0.355	0.281	0.243

About Northern Bear

Northern Bear Plc, through its subsidiaries, provides building and support services to local authorities, housing associations, NHS trusts, universities, construction companies, and national house builders in Northern England. It operates through Roofing Activities, Materials Handling Activities, and Building Services Activities segments. The company provides roofing contractor services, including roof slating, tiling, felting and general roof repairs, refurbishment, and maintenance for local authorities, housing associations, and house builders. It is also involved in the supply and fixing of passive fire protection, fire stopping systems, and acoustic insulation to new build and existing structures; collection, removal, treatment, and disposal of asbestos; provision of asbestos surveying services; and provision of building contractor services, including restoration and refurbishment contracts for local authorities, heritage organizations, and private customers. In addition, the company offers video footage and professional still photography for various applications, such as building and structural surveys, roof inspections, property presentations, and sporting and leisure events coverage; and solar PV systems installation services, as well as health and safety training and consultancy services. Further, it leases, rents, and maintains fork lift trucks and warehouse equipment for a range of commercial customers. The company was incorporated in 2006 and is based in Newcastle upon Tyne, the United Kingdom.