Northern Bear

Acquisitive building services group Northern Bear is bucking the cycle with first-half pre-tax profits up 111 per cent to £2.1m.

The Durham-based company, which has been switching out of servicing the vulnerable new-build sector into less cyclical areas such as local authority and ‘affordable’ housing, increased turnover 71 per cent to £23.4m in the six months to September and pushed earnings up 59 per cent to 8.1p a share. Chief executive Graham Forrest says the growth has come almost entirely from acquisitions, which have taken AIM-quoted Northern into businesses such as roofing, asbestos removal and plumbing.

He argues the company, which has developed ‘long-standing relationships with schools, local authorities and housing associations’, has often secured ‘preferred status’ in competitive tenders and is well placed to benefit from the Government’s behind-schedule ‘Decent Homes’ programme to upgrade local authority and social housing by 2010. According to Forrest, Northern only buys companies on price/earnings of between two and three, with ‘no earn-outs’ and at least 25 per cent paid in equity to key management who undertake to stay on.

Forrest suggests profits growth will enable Northern to reduce its £9m debt and fund further acquisitions. Analysts suggest the company can increase pre-tax profits 52 per cent to £3.5m in the full year to March, with earnings 40 per cent ahead at 14p a share.

Recommended by Growth Company Investor in June at 109p, Northern’s shares fell to 56.5p last month amid the overall stock market turmoil. They have now bounced to 73p and should prove more resilient than many in today’s circumstances.

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