Northern Bear revenue jumped on 17.6% and EBITDA Margin showed almost no change

16 Jul 2018 • About Northern Bear ($NTBR) • By InTwits

Northern Bear reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:

EBITDA Margin is relatively stable: 6.5% in FY2018 vs. 6.8% in FY2017 vs. 7.4% in FY2014
Northern Bear has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's in pair with industry average of 4.1%
CAPEX is quite volatile: £1m in FY2018, £1m in FY2017, £2m in FY2016, £1m in FY2015, £1m in FY2014
The company has highly profitable business model: ROIC is 12.0%

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

Revenue and profitability

Northern Bear's Revenue jumped on 17.6%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin surged on 12.0 pp from 5.8% to 17.8% in FY2018. EBITDA Margin followed a declining trend at -0.29 pp per annum in FY2014-FY2018.

Gross Margin decreased slightly on 0.82 pp from 20.4% to 19.6% in FY2018. Gross Margin followed a declining trend at -1.4 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 0.94 pp from 14.9% to 13.9% in FY2018.

Net Income margin increased on 8.7 pp from -5.0% to 3.7% in FY2018.

Investments (CAPEX, working capital and M&A)

In FY2018 Northern Bear had CAPEX/Revenue of 1.1%. The company showed small CAPEX/Revenue decline of 0.63 pp from 1.7% in FY2015 to 1.1% in FY2018. For the last three years the average CAPEX/Revenue was 1.6%. During the last 5 years CAPEX as a % of Revenue topped in FY2016 at 2.2% and was declining since that time.

Return on investment

The company operates at good ROIC (12.0%) while ROE is low (9.7%). ROIC increased slightly on 1.7 pp from 10.3% to 12.0% in FY2018. ROE surged on 20.5 pp from -10.8% to 9.7% in FY2018.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.3x and Debt / EBITDA is 0.8x. Net Debt / EBITDA surged on 0.4x from -0.1x to 0.3x in FY2018. Debt jumped on 26.9% while cash dropped on 33.0%. Net Debt/EBITDA stuck to a declining trend at -0.5x per annum in FY2014-FY2018.

Northern Bear has no short term refinancing risk: cash is higher than short term debt (762.6%).

Financial and operational results

FY ended 31 Mar 2018

Northern Bear ($NTBR) key annual financial indicators

mln. £	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	36.781	41.723	36.466	45.563	53.573	17.6%
Gross Profit	9.239	9.826	8.924	9.307	10.506	12.9%
SG&A	7.025	7.116	6.830	6.772	7.459	10.1%
EBITDA	2.731	3.239	2.635	3.097	3.472	12.1%
Net Income	1.335	1.508	1.454	-2.272	1.984
Balance Sheet
Cash	0.111	0.502	1.898	2.583	1.731	-33.0%
Short Term Debt	4.833	1.049	4.607	0.163	0.227	39.3%
Long Term Debt	1.039	4.599	0.119	2.122	2.672	25.9%
Cash flow
Capex	0.436	0.705	0.813	0.689	0.569	-17.4%
Ratios
Revenue growth	4.6%	13.4%	-12.6%	24.9%	17.6%
EBITDA growth	22.9%	18.6%	-18.6%	17.5%	12.1%

Gross Margin	25.1%	23.6%	24.5%	20.4%	19.6%	-0.8%
EBITDA Margin	7.4%	7.8%	7.2%	6.8%	6.5%	-0.3%
SG&A, % of revenue	19.1%	17.1%	18.7%	14.9%	13.9%	-0.9%
Net Income Margin	3.6%	3.6%	4.0%	-5.0%	3.7%	8.7%
CAPEX, % of revenue	1.2%	1.7%	2.2%	1.5%	1.1%	-0.5%

ROIC	8.8%	10.4%	7.8%	10.3%	12.0%	1.7%
ROE	7.0%	7.4%	6.7%	-10.8%	9.7%	20.5%
Net Debt/EBITDA	2.1x	1.6x	1.1x	-0.1x	0.3x	0.4x

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	FY2014	FY2015	FY2016	FY2017	FY2018
Mobilityone Ltd ($MBO)	3.7%	23.0%	-5.3%	37.9%
Mortice Ltd ($MORT)	11.0%	18.9%	51.1%	36.1%
Rws Hldgs ($RWS)	20.9%	1.8%	28.1%	34.5%
Empresaria Group ($EMR)	-3.3%	-0.3%	44.4%	32.1%
Norish ($NSH)	3.7%	16.4%	16.7%	31.4%
Median (48 companies)	5.8%	6.9%	3.5%	7.0%	8.1%
Northern Bear ($NTBR)		13.4%	-12.6%	24.9%	17.6%

Top companies by Gross margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Inspired Energy ($INSE)	78.7%	76.2%	80.5%	83.1%
Ienergizer Ltd ($IBPO)	76.8%	72.7%	71.3%	71.2%	69.7%
Spectra Systems Corp ($SPSY)	51.4%	47.6%	68.3%	71.1%
Vianet Group ($VNET)	58.8%	69.2%	70.1%	69.7%	69.9%
Grafenia ($GRA)	56.1%	70.8%	66.3%	63.0%	57.0%
Median (42 companies)	29.2%	28.4%	27.3%	28.3%	32.0%
Northern Bear ($NTBR)	25.1%	23.6%	24.5%	20.4%	19.6%

Top companies by EBITDA margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Northgate ($67GX)	40.6%	39.4%	38.3%	35.9%	35.4%
Spectra Systems Corp ($SPSY)	12.3%	6.0%	19.7%	34.0%
Inspired Energy ($INSE)	1.5%	35.4%	34.4%	32.4%
Vp ($VP.)	24.2%	26.2%	28.4%	28.6%	27.2%
Rws Hldgs ($RWS)	22.8%	23.1%	26.4%	25.5%
Median (48 companies)	6.7%	6.9%	4.9%	5.3%	9.6%
Northern Bear ($NTBR)	7.4%	7.8%	7.2%	6.8%	6.5%

Top companies by CAPEX/Revenue, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Vp ($VP.)	21.6%	25.7%	24.1%	26.0%	23.6%
Augean ($AUG)	12.3%	12.3%	11.0%	10.0%
Petards Group ($PEG)	0.5%	0.9%	1.7%	10.0%
Capital Drilling Ltd ($CAPD)	13.9%	10.1%	13.7%	9.0%
Billing Services Group ($BILL)	2.1%	4.1%	3.0%	4.5%
Median (48 companies)	1.0%	0.9%	1.0%	0.9%	1.5%
Northern Bear ($NTBR)	1.2%	1.7%	2.2%	1.5%	1.1%

Top companies by ROIC, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Sthree ($STHR)	38.1%	50.2%	46.2%	43.4%
Mortice Ltd ($MORT)	19.6%	21.9%	14.5%	23.2%
Petards Group ($PEG)	24.7%	23.9%	22.7%	20.3%
Rws Hldgs ($RWS)	24.5%	23.3%	23.5%	20.2%
Latham(James) ($LTHM)	17.5%	16.8%	19.2%	19.3%	17.4%
Median (49 companies)	11.1%	10.7%	7.9%	7.5%	6.8%
Northern Bear ($NTBR)	8.8%	10.4%	7.8%	10.3%	12.0%

Top companies by Net Debt / EBITDA


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Nakama Group ($NAK)	5.2x	1.4x	3.1x	48.5x
21St Century Technology ($C21)	-0.8x	-0.2x		11.2x
Ceps ($CEPS)	6.6x	3.8x	13.9x	5.8x
Ibex Global Solutions ($IBEX)	2.7x	1.0x	1.7x	4.5x
Menzies(John) ($68HN)	2.0x	2.4x	1.2x	3.0x
Median (42 companies)	0.1x	-0.1x	0.1x	0.5x	1.2x
Northern Bear ($NTBR)	2.1x	1.6x	1.1x	-0.1x	0.3x

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.