Northern Bear

Acquisitive building services and materials concern Northern Bear claims to see ‘an encouraging upturn’ in demand in some key activities.

The Chester-le-Street-based company recently announced it had increased annual pre-tax profits 26% to £2.85m on turnover up 30% to £42m in the face of market conditions described as ‘challenging’ by chief executive officer Graham Forrest. He argues long-term relationships and partnerships with ‘blue chip’ builders have helped insulate AIM-quoted Northern from the worst of the recession, as has cutting new house build from 13% to 4% of turnover and supplying 55% of its diverse range of services to the public sector.

Forrest says the company, which has been freezing pay and suspending non-contractual bonuses and the final dividend to cut costs, is continuing to win new business, partly thanks to recruiting key staff from competitors. He argues Northern, which has nearly 44% gearing and interest cover of 4.8 times, intends to fund future acquisitions with vendor equity and its own resources, rather than using bank debt.

The market expects the current year to next March to bring a decline in business, given the overall sector’s problems, with an upturn in 2010-011. Nevertheless, Northern is likely to outperform several others in the sector and could be well placed for the eventual upturn.