Northern Bear – yesterdays results show how undervalued its shares are at just 94p, trading on a mere 5.6 times earnings – the SQC Research Target Price is now set at an easy 120p

16.07.2025

Yesterday’s annual results to end-March 2025 announced by the Northern Bear (LON:NTBR) building services group were excellent.

On the back of a 13.7% increase in group revenues to £78.11m (£68.68m), the company reported a 42.76% improvement in its pre-tax profits to £3.05m (£2.14m), which generated earnings 76.8% better at 16.8p (9.5p) per share, more than amply covering the 2.5p (2.0p) dividend, plus the 1.0p special dividend.

The recent Tender Offer and Cancellation of some 5m shares helped to reduce the number of shares outstanding to just 13.75m, while boosting its earnings per share returns.

In its last Trading Year, the group delivered strong growth in its operating results, building on its strong performance of prior years.

The company reported that site activity levels had remained high, despite the ongoing macro-economic challenges and their related impact on the construction industry.

Its trading was strong throughout that year, with the group benefitting from the very dry winter period and the strategy of maintaining a good balance of private and public sector clients. 

The Business

Northern Bear, which listed in 2006, consists of nine wholly-owned specialist building service providers in the North of the UK, primarily in the North-East and Yorkshire and mainly serving public-sector customers.

The company’s projects are mostly for existing buildings and typically completed within weeks or months.

The group reports in three main segments: Roofing (42% of sales in FY25), Specialist Building Services (53%) and Materials Handling (5%) which is a forklift/truck reseller and leasing company.

The group seeks to achieve organic growth and bolt-on accretive acquisitions.

Outlook

The company yesterday reported that its forward order book remained strong and is expected to support its trading performance in the coming months.

Conservatively, the group states that the timing of its turnover and profitability is difficult to predict, despite the continued strong order book, and its results are therefore subject to monthly variability.

However, it states that it has made a strong start to FY26 and that its results to date have been in line with management expectations.

The Equity

Following the recent Tender Offer and Cancellation of 5m shares, there are now some 13.75m shares in issue.

The largest shareholder is the Family Office of Nicholas Beaumont-Dark (26.4%), while other large holders include Steven Roberts, Dir (5.9%), David Jay (4.1%) and Keith Soulsby (4.1%).

Broker’s View

Analyst Jon Levinson, at Hybridan, noted that the group’s strategic refocus has been on investing in people and facilities to drive core building services growth and improve margins.  

For the current year to end-March 2026 his estimates are for £82.0m sales, £3.15m profits, 17.6p earnings and a 2.5p dividend per share.

His estimate of the group’s end-year net cash is for £3.32m (£2.50m).

Hybridan conclude its note on the group by stating that:

“The historic P/E of 5.5x seems low given that a progressive dividend is being paid.

As the Company invests in upvaluing its services and margins improve, the P/E ratio should be nearer the Construction Services sector average of 15.6x.

The organic growth prospects remain solid, and the shares seem undervalued.”  

My View

Considering that this little £13m-capitalised company has cash and facilities on hand to further its ambitions, both by organic and acquired expansion, it needs to improve its investor awareness.

Currently, it is well below the‘ investor radar’, which is a shame because I do feel that it could well prove to be a very useful ‘vehicle’ going forward.

The shares, having peaked at 98p earlier this week, are now 94p, a level last seen way back in 2008.

Cautiously, until it steps up its action, I am now putting out an easily achievable SQC Research Target Price of 120p.

(SQC Research Profile - 16.07.2025 @ 94p sets a Target Price of 120p)