Northern Bear on growth tack

21/05/2008 Robert Tyerman

Acquisitive building services group Northern Bear is poised for further expansion after £2.9 million annual pre-tax profits.

Newcastle-based Northern, whose strategy is to buy ‘mature and profitable’ businesses in the north-east with an emphasis on local authority housing regeneration, achieved turnover of £32.2 million in the 12 months to March, its first full year since incorporation as a public company. Chief executive Graham Forrest says the company, which last month bought A1 Industrial Trucks and plumbing group D J McGough for up to a combined £6.7 million, has shifted its emphasis from house building to regeneration to reflect both cyclical market changes and to exploit current long-term government and local authority programmes.

He says that the policy is to steer clear of turnarounds and go for established, successful businesses in, say, roofing or asbestos removal. A1 Trucks and D J McGough are the 11th and 12th acquisitions made so far by Northern, which aims to buy these companies for no more than three times earnings and to bolt in successful managements by paying around 25 per cent of the price in Northern shares and offering target-based bonus payments thereafter.

The company, which earned 14.3p a share, proposes a 2p final dividend, taking the full-year payout to 3p a share. Forrest, who says Northern is 39 per cent geared and foresees no need to raise new equity in the foreseeable future, proclaims directors intend to pursue an ‘aggressive’ dividend policy.

House broker St. Helen’s predicts pre-tax profits of £4.3 million for the current year, with earnings of 18p a share. The shares, which were floated at 88p in December 2006 and reached 173p last July, now trade at 112.25p, up 14p this morning, which seems a grudging rating.

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