Northern Bear (NTBR)

My first recommendation is Northern Bear.

Summary
EPIC NTBR
Current Share price as at 18th May 2011 - 11p mid point.
Market cap of equity - £2.13m (yes, just £2m, it really is a micro cap)
Year end March 2011
Historic EPS 4.5p
Forecast EPS 2011 3.6p, 2012 4.3p, 2013 4.9p
(although the company have admitted they are unlikely to hit the 2011 target - more of this later).

Historic p/e 2.4
Forecast p/e 3.1

Half -Year results to 30 Sep 2010 can be seen in the link below.
http://www.northern-bear.com/financialoverview.html

Company Description
Northern Bear is an acquisitive support services and building services business, or at least it was acquisitive until it ran out of cash. They are based in the north east of England.

Revenues are split approximately 45% to the social housing sector, 8-9% new build houses and the rest from private contracts including high margin areas such as asbestos removal and fire prevention.
A good write up can be found here...
http://www.stockopedia.co.uk/content/northern-bear-aiming-to...


Share price history
The share price has been hit very hard recently by exposure to government contracts, building services and the cold snap in November and December causing a profits warning to be issued recently.

http://www.northern-bear.com/announcements.html#aaz

The profits warning effectively saying that even though trading this year is strong, it has not been sufficiently strong to make up for lost trading due to the cold snap and as such, profits will be behind broker forecasts.

Additionally there has been concern over the banking covenants, though they currently have facilities for £10m, net debt is £9.1m at September and they are paying down debt at a rate of £1m per year.

The share price peaked at 173p in July 2007, and since then has seen a steady decline to the current 11p level.

Trading history
Year Ending Revenue (£m) Pre-tax (£m) EPS
31-Mar-07 4.75 0.08 1.40p
31-Mar-08 32.24 2.25 10.30p
31-Mar-09 41.76 2.86 12.20p
31-Mar-10 34.98 -1.11 4.50p

HY to Sept 2010 15.9 0.3 2.2p

Outlook
While the profits warning hit the share price, they did acknowledge that "Trading conditions improved in January, and activity has increased further since that time. Whilst March was a very positive month".

Loss making businesses are being disposed of, with the latest, Hastie D Burton, being sold for just £1 in April.

This could be a very interesting turnaround story and while the balance sheet does look rather shaky (very shaky indeed if you strip out the £21.7m of intangibles), they are cash generative and profit making and while they continue to have the support of their finance providers and continue to pay the debt down, they could turn this into a lovely recovery business.

In summary, I am looking for the good trading in January and February to continue into 2011, allowing more paying down of the debt, and increased profits.

Once the market sees that the debt is manageable and the cashflow is continuing, then this share could increase significantly. However, as with all very small companies, it is cheap for a reason and there is substantial risk involved.