• Northern Bear: Me and the market are not on the same page

    Disclosure: I have an interest in Northern Bear shares

    Trading update

    Northern Bear released a trading update today. It had three key notices:

    • Trading in the year to 31st March has been good - 'at least in line with the prior year'.
    • Chirmarn, the group's asbestos removal company, has had another bad year. It is loss making and drawing on group cash. As a consequence, it will be sold for £50k.
    • New bank facilities are in place, now for £3.5m, to replace the term loan expiring last week. These have a reduced interest rate (previously LIBOR+325bps) and a £1m overdraft facility. I think the group should be below £2m net debt at year end, so this does give significant flexibility.

    The fun thing about investing in a company like Northern Bear is that no-one really knows what the stock will or should do on a results announcement. Trading volumes are incredibly thin. There are no institutions driving liquidity. There are no broker notes to set expectations or guide participants, so there is no uniform consensus of what constitutes a 'surprise'. (more…)

  • Northern Bear: Not So Grizzly Now

    Disclosure: I have an interest in Northern Bear shares NTBR_Numbers Northern Bear is a small, northern English building services firm traded on AIM.

    To understand any business, you need to understand a little about the history. Northern Bear was, as was often the case in the good old days, cobbled together with flowing money and attractive public markets. Several construction-related groups joined forces to create a platform company, with the intention of buying further complementary businesses and scaling up the combined group. Isoler, Roof Truss, Springs Roofing and Wensley Roofing all joined forces to create Northern Bear, which floated in late 2006. Whether they would have made a success of their acquisition strategy is difficult to say, because they got a pretty short pop at it before the recession crashed the party. Debt-financed purchases were out. Anything construction related was definitely out. In some senses they weren't so dissimilar from Judges in that they planned to provide exits for small, owner-operated building services firms at attractive multiples for the group. A key difference is that they were rolling up a market which saw swingeing cuts in spending in 2008-2009, and thus necessitated a complete change of strategy. (more…)