TIDMNBI
RNS Number : 1745D
Northbridge Industrial Services PLC
25 April 2017
25 April 2017
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Preliminary Results for the Year Ended 31 December 2016
Northbridge Industrial Services plc, the industrial services and
rental company, today announces its preliminary results for the
year ended 31 December 2016.
Key points:
-- Performance is in line with the Board's expectations
-- Group revenue as anticipated, was 30.2% lower at GBP23.8
million (2015: GBP34.1 million)
-- Continued positive cash generation from operations of GBP1.8
million (2015: GBP6.9 million)
-- EBITDA (pre-exceptional) of GBP3.4 million (2015: GBP6.0
million)
-- Loss before tax of GBP5.5 million (2015: GBP8.6 million)
including exceptional costs of GBP1.4 million (2015: GBP7.2
million)
-- Pre-exceptional operating costs 18.4% lower at GBP12.7
million (2015: GBP15.5 million)
-- Net debt significantly reduced by 33.6% to GBP9.5 million
(2015: GBP14.3 million)
-- Net gearing decreased to 22.7% (2015: 39.8%)
-- Tangible net assets of GBP27.7 million (2015: GBP23.1
million)
-- Successful placing and open offer raising net GBP5.3
million
-- Restructuring complete reducing operating costs by GBP4m on
an annualised basis; management are now focusing on a market
recovery
Eric Hook, Chief Executive Officer, commenting on the results
and outlook said:
"During the second half of the year the Group's performance
stabilised and Northbridge continues to generate a positive
operating cash flow. Our placing and open offer in April, which
raised GBP5.3 million, was well supported both by existing
shareholders and new institutional investors and we thank them all
for their support. The proceeds of the equity raise have been used
to strengthen the balance sheet and support the business going
forward.
We expect our debt to continue to decline quickly over the next
two years; a period when we expect our markets to stabilise. This
will then enable us to resume investing in our business using our
cash flows generated from operations as demand for our services
begins to increase again.
Our reorganisation, which started in early 2015, continued into
2016 and has now been successfully completed in a systematic and
organised way. We have also made further modest investment in the
US and Chinese loadbank markets laying the foundation for future
growth. The Group is now streamlined into two distinct core
business activities, Crestchic Loadbanks and Tasman Oil Tools, and
the management structure has been reorganised to reflect this.
Trading in early 2017 has continued at levels experienced in
late 2016. We are still confident of an upturn in the oil and gas
sector however it's timing remains uncertain. We are focused on
return on capital, and Northbridge is well positioned to capitalise
on a recovery with a solid and cash generative core business, a
strong balance sheet, and having maintained critical mass and
customer relationships throughout the trough of the cycle."
Outlook:
There can be no doubt as to the severity of the downturn
affecting the oil and gas industry over the last two years and,
like others, this has had an impact on our trading. It has also
conditioned us to look more sceptically at the pace of the future
recovery and "lower for longer" remains the oil and gas industry's
mantra. However, we do believe that there is a better trading
environment on the way, supported by a more stable oil price as a
result of more co-ordination by producer nations and a reducing
surplus. In addition, the Initial Public Offering of Saudi Aramco
scheduled for 2018/19 will also assist in the maintenance of an
orderly market for the immediate future.
The combination of cost reductions implemented by the
international oil companies and the oil service majors has reduced
the break-even level for new oil production. This means that more
drilling activity by the E&P sector is likely over the next few
years, as reserves, which are currently at a 70-year low, are
replenished. Activity in the shipyards, where we provide power
testing equipment, will take a bit longer to recover as our
involvement comes more towards the end of the investment in new and
recommissioned oil rigs, FPSOs, etc.
Northbridge is very well placed to benefit from a future
recovery. While remaining cash generative, we have completed our
restructuring and now have a much lower cost base with a large,
well maintained and modern hire fleet and manageable gearing. We
have also made further modest investment in the US and Chinese
loadbank markets laying the foundation for future growth. The
separation of the two trading subsidiaries into activity based
management will enable better focus going forward which will ensure
all opportunities can be fully exploited. Having retained all our
operating bases during the downturn and maintained relationships
with all our customers, additional revenue coupled with our high
operational gearing will support bottom line growth.
For further information
Northbridge Industrial Services plc 01283 531645
Eric Hook, Chief Executive Officer
Iwan Phillips, Finance Director
Stockdale Securities Limited (Nominated Adviser and Broker) 020
7601 6100
Robert Finlay / Antonio Bossi / Henry Willcocks
Buchanan 020 7466 5000
Charles Ryland / Stephanie Watson / Catriona Flint
About Northbridge:
Northbridge Industrial Services plc hires and sells specialist
industrial equipment. With offices or agents in the UK, USA, Dubai,
Belgium, Germany, France, Australia, New Zealand, Singapore, China,
Brazil and South Korea, Northbridge has a global customer base.
This includes utility companies, the oil and gas sector, shipping,
banking, mining, construction and the public sector. The product
range includes loadbanks, transformers, and oil tools. Northbridge
was admitted to AIM in 2006 since when it has grown by providing a
high level of service, responsiveness and flexibility to customers.
It has grown by the acquisition of companies in the UK, Dubai,
Australia, Belgium, New Zealand and Singapore and through investing
further in those acquired companies to make them more successful.
Northbridge continues to seek suitable businesses for acquisition
across the world.
CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW
We are pleased to present our review of the Group's trading
performance for 2016.
BUSINESS REVIEW
We were encouraged by the first sustained recovery in the price
of oil which became apparent in the last few weeks of 2016 as plans
were announced by OPEC to manage supply and demand and reduce
surplus oil stocks. However, the downturn in the oil and gas
industries did impact the Group's revenues during 2016. Following
the record low in the crude oil price in February 2016, the Group
suffered its worst trading period in the second quarter but, since
that point the oil price has recovered and there was some modest
stabilisation in the market. The second half of the year showed no
further decline in performance and the Group continued to generate
a positive operating cash flow.
The placing and open offer in April raised GBP5.3 million and
was well supported by existing shareholders and additional new
shareholders which include Gresham House and The Business Growth
Fund. The proceeds of the equity raise were used to strengthen the
balance sheet and support the business going forward. The net
effect was to reduce bank debt, reduce the deferred consideration
outstanding and make covenant compliance easier. Our banks, RBS and
KBC, remain supportive of the Group and of our strategy.
The reduction in investment by the oil and gas majors over the
last two years has particularly impacted drilling activities for
both exploration and production. In addition, it also had a
disruptive effect on marine engineering relating to the oil
industry and therefore had a materially adverse effect on our
business. Outside of Western Europe, much of our business is
conducted with customers involved in some way with the oil, gas and
extractive industries, usually marine or other power intensive
industries, as well as oil tools. Northbridge, as part of its
strategy, is fortunate to be diversified and to have other
activities, mostly operating from Western Europe, which have been
less impacted by the malaise of the oil industry, as they are more
focused towards power reliability and utilities. Some of these
activities have been counter-cyclical and have benefited from the
much lower fuel price, with numerous contracts having been extended
as well as winning new ones.
Our reorganisation, which we initiated in early 2015, continued
into 2016 and has now been completed in a systematic and organised
way. This included freezing all expansion capital and other
non-essential fleet replacements, exiting all non-core businesses
and converting their assets into cash and closing non-performing
locations. Further streamlining has focused on reducing debt and
overhead costs throughout the Group. Overhead costs have been
reduced by GBP4m on an annualised basis.
Substantial savings have now been made in the core business and
the significant reduction of rents in Australia have given us the
confidence to maintain our presence and operating readiness in that
location. By taking these actions in the overseas businesses we
were able to share cash and management resources without recourse
to Group funds in the UK. Average headcount was reduced by 18% to
167 and by the year end still further to 150, a reduction of 30%
from the peak in 2014.
We have made a conscious effort to maintain good relations with
our customer base and continued to improve our quality assurance
regime and the availability of our hire fleet during this difficult
period. Modest, targeted capital expenditure has enabled us to
focus loadbank investment on growing markets in North America and
China.
The Group is now streamlined into two distinct core business
activities, Crestchic Loadbanks and Tasman Oil Tools, and
management has been reorganised to reflect this new structure.
Crestchic Loadbanks, which manufactures in the UK, sells and
rents electrical equipment throughout the world with depots in the
UK, France, Germany, Belgium, Dubai and Singapore. It has satellite
operations and agents/distributors in China, the USA, Australia and
Brazil. It has a particularly strong position in the Western
European rental market which is more focused towards power
reliability. Outside of the western economies, business is
generated from offshore activities in oil and gas and shipping and
in industrial and remote locations using large amounts of power.
The recent downturn in the industries relating to oil and gas
adversely affected this part of Crestchic's rental business;
however, the growing demand from data centres and for power
reliability more than compensated and overall rental showed an
improvement from 2015.
Our start-up rental operation in North America had a solid start
and the future is encouraging; however, this market operates with
different frequencies and voltages to most of the rest of the world
and will require further capital expenditure before it can be more
broadly exploited. Our operation in China also had an encouraging
start and now has a local presence with some permanently imported
hire fleet. Marine construction tends to migrate to the most
efficient yards and, with an increasing migration to China, we have
needed to follow this trend.
On the lower margin sales side our two biggest markets, the USA
and South Korea, showed very little demand and volumes have been
much lower than in previous periods. However, new markets involved
in the UK Grid's balancing reserve and in renewables have begun to
open up to us and we see a good future in this sector, not just in
the UK, but across the developed world.
Tasman Oil Tools continued to suffer from a decline in rental
revenue as investment in exploration and production continue to be
cut by the national oil companies and the oil majors. Following the
record low in oil prices in February 2016, our rental revenues also
reached a record low, but stabilised in the second half. Since this
time, the market seems to have bottomed out and sentiment is
beginning to improve. Despite the "lower for longer" mantra, it is
now expected, and there is evidence to support, that there will be
a gradual improvement in investment over the next three years. Over
the last few years, the industry has focused on cost cutting,
reducing capital spending and maximising cash flow to lower their
"break even" point and it is now in a position where, to ensure
future production and profitability, operators need to engage in
exploration as new recoverable discoveries are at a 70-year
low.
Current supply and demand approached equilibrium following
OPEC's decision at their November 2016 meeting to agree a
production cut from 1 January 2017. This is the first such
agreement for 14 years and other non-OPEC producers have joined in.
Early analysis appears to show that the policy is working; the
price of oil has stabilised, and the current surplus will be
eradicated in the next 6 to 9 months. The planned IPO of Saudi
Aramco within the next two years is also likely to lend support to
a more orderly market for oil in the immediate future.
During this period Tasman concentrated on cutting costs,
maintaining quality systems and the readiness and availability of
the hire fleet. As well as keeping customer relationships in good
order, we have been developing partnerships and agency agreements
to open up new markets for our existing equipment and expand our
services where we already operate.
Historically, all of Northbridge's overseas businesses have been
managed as a single entity and, during the downturn, this enabled
management resources to be directed to the areas of most need.
Importantly, they were also able to share their cash resources, and
this enabled us to support the loss-making but otherwise core
activities of oil tool rental, without recourse to Group funds in
the UK. The very robust cash flows from the UK hire business was
used to service the current debt and make the scheduled bank
repayments on time as well as some modest capital investment.
Looking to the future, and with the belief that a recovery is
near, the change in the organisation of the management structure
between the two business activities of Crestchic and Tasman will
give additional clarity and focus, enabling each business to better
allocate resources and maximise future growth opportunities from
the platform of the Group's substantial net assets of GBP41.8
million (2015: GBP35.9 million).
Financial performance
The impact of all these factors on the Group resulted in total
revenue reducing by 30.2% to GBP23.8 million (2015: GBP34.1
million). Included in this figure, Tasman's revenue was GBP4.5
million (2015: GBP10.5 million), a decline of 57.6% and Crestchic's
revenue was GBP19.3 million (2015: GBP22.8 million), a decline of
15.1%. However, a strong performance from Crestchic's European
rental business, with revenues up 16.8%, helped improve the revenue
mix towards the more profitable hire activity. Hire revenue was
66.5% (2015: 55.6%) of the total revenue compared with sales
revenue of 33.5% (2015: 44.4%). The decline in volumes for Tasman
and the Crestchic sales businesses was almost all due to the
downturn in the oil and gas industry.
The overall gross margin was 38.4% (2015: 43.4%). The decline in
margin was due to lower utilisation in oil tools where we continue
to charge a full depreciation on the whole hire fleet. Operating
expenses were GBP12.7 million for the full year (2015: GBP15.5
million) and are now running at around GBP1.0 million a month,
which is around GBP400,000 lower than the peak cost in the last
quarter of 2014 when Tasman New Zealand was acquired. This current
run rate also includes the additional costs of the Crestchic
start-ups in China and the USA.
Pre-exceptional losses for the year were GBP4.1 million (2015:
GBP1.4 million). Exceptional costs relating to the ongoing
rationalisation and restructuring programme, which has now drawn to
a close, amounted to GBP1.4 million (2015: GBP7.2 million). The
2015 figure included an impairment charge to intangible assets of
GBP4.9 million. The Directors have reviewed the carrying value of
both tangible and intangible assets and have concluded that no
further impairment charge is necessary. Pre-exceptional EBITDA was
GBP3.4 million (2015: GBP6.0 million).
Crestchic Loadbanks and Northbridge Transformers (Crestchic)
Crestchic designs, manufactures, sells and hires loadbank
equipment, which is primarily used for the commissioning and
maintenance of independent power sources such as diesel generators
and gas turbines. The need to test and maintain standby and
independent power systems, together with the associated switchgear
and controls, is an increasingly important element within the power
critical technology used by the banking, medical, marine and
defence industries. This has resulted in continued strong demand
for Crestchic's range of equipment and services throughout the
world. Additionally, Crestchic continues to benefit from a
background of an increasingly unreliable global power
infrastructure and an increase in the size and remoteness of
certain projects. All our loadbank activities are now branded as
"Crestchic" and we are able to promote that service in an
integrated way throughout the world.
Northbridge Transformers ("NT"), which is based in Belgium,
offers specialist transformers for rental throughout the world. NT
is also able to use Crestchic's depots in the Middle East and in
Singapore as a conduit for its activities. Substantial investment
in this activity over the last few years means we have been able to
grow this business from its original base in Belgium to a worldwide
audience.
Crestchic has been impacted by the ongoing oil and gas downturn
and sales of manufactured units were GBP6.8 million (2015: GBP11.9
million). Particularly affected were the two main markets of South
Korea and the USA. However, our rental activities enjoyed another
record year and turnover was up 14.9% to GBP12.5 million (2015:
GBP10.9 million), with this revenue more directed towards power
reliability, utilities and data centres as well as marine
engineering. Within the Crestchic rental figure, Northbridge
Transformers had another record year despite the absence of the
COP21 climate change conference contract and revenue was GBP1.8
million (2015: GBP1.6 million).
Overall gross margin was 47.2% (2015: 44.1%). The movement in
mix towards the higher margin rental activity helped support an
increase in overall margin, and, even on the lower volumes,
equipment sales margins improved to 35.6% (2015: 32.1%).
Tasman Oil Tools (Tasman)
Tasman now operates from a single corporate platform, with an
integrated website, and management quality systems, with depots in
Australia, Dubai and New Zealand. It offers a full range of
downhole oil tools to the oil, gas and geothermal industries
throughout the Middle East, Far East and Australasia. This is
predominantly a rental business and revenue has suffered as a
result of the downturn in drilling activities in the regions it
serves. Total turnover was GBP4.5 million, down from GBP10.5
million in 2015.
Gross margin fell to 10.2% (2015: 44.1%) due to lower
utilisation of the rental fleet during the year and the fact that a
full depreciation charge against the fleet is taken irrespective of
the hire status. Lower rental volumes also lead to lower service
charges to the customer, which also impacts both turnover and gross
profits. Pre-exceptional losses were GBP3.6 million compared with a
loss in 2015 of GBP0.7 million.
The downturn in the oil and gas industry affected this part of
Northbridge's activities severely due to its very high operational
gearing. Australia in particular, which operates from leasehold
premises, was loss making at a cash level. Substantial reductions
in rents were agreed during 2016 for the two depots we operate from
in Australia and these will last until the leases end in 2020. The
property in Darwin has been vacated and a new tenant is being
actively sought. Every effort has been made to reduce all other
costs in these businesses to avoid recourse to Group funds. The
fact that this strategy has been successful so far, gives us
confidence that we can remain at an operating readiness to ensure
we benefit from a cyclical upturn.
Additionally, we continued to maintain our QHSE systems to the
highest level, maintained an ongoing relationship with our customer
base and continued to seek other markets for our equipment. We
particularly focused on agency agreements, partnerships and joint
ventures in adjacent territories where we had no presence as well
as master service agreements with the oil service majors. Tasman
has a large, modern, unencumbered hire fleet which is well
maintained and ready for rental. Any recovery will enable this
operational gearing to start working in our favour as rental
revenue builds.
FINANCIAL REVIEW
Foreign exchange
The weakening of Sterling during the year impacted the Group's
losses and balance sheet. On a constant currency basis revenue
would have been GBP1.4 million lower than reported at GBP22.4
million and the pre-exceptional loss before tax would have been
GBP0.3m lower at GBP3.8 million. A significant factor in the higher
reported loss is due to depreciation being GBP6.2 million which is
GBP0.5 million higher than on a constant currency basis of GBP5.7
million. Reported pre-exceptional operating costs were GBP0.7
million higher at GBP12.7 million than the constant currency figure
of GBP12.0 million.
As shown in note 2, the Group holds substantial assets overseas
and this, coupled with the majority of the debt being in Sterling,
has resulted in the value of the Group's balance sheet increasing
by GBP6.8 million due to currency movements.
Revenue and profit before tax
The Group's revenues are derived principally by the rental of
its hire fleet and also by the sale of manufactured and new
equipment. The split of these revenues between the various
reportable segments and activities compared with 2015 is shown in
note 2.
As many of the Group's costs are largely of a fixed nature in
the short to medium term (with significant movements in the cost
base being attributable to acquisitions and divestments) any
revenue movement, however small, will be highlighted at the
operating profit level. This impact is often referred to as
operational gearing. Gross profit for the year decreased to GBP9.1
million from GBP14.8 million, following the reduction of overall
revenue.
Net finance costs for the year decreased slightly to GBP0.6
million (2015: GBP0.7 million), due to a decrease in the level of
average net debt across the period following the placing and open
offer in the first half of 2016.
The Group incurred exceptional costs during the year totalling
GBP1.4 million (2015: GBP7.2 million). This was mainly due to the
costs of exiting non-core businesses and the cost reduction
exercise mentioned above.
Losses before tax (pre-exceptional) totalled GBP4.1 million
(2015: GBP1.4 million). Total losses before tax totalled GBP5.5
million (2015: GBP8.6 million).
Earnings per share
The basic and diluted LPS of 26.2 pence (2015: 42.8 pence) have
been arrived at in accordance with the calculations contained in
note 5.
Balance sheet and debt
Total net assets have increased by GBP5.9 million during the
year to GBP41.8 million primarily due to the successful placing and
open offer raising GBP5.3 million and a positive movement of GBP6.8
million in the foreign exchange reserve being offset by the loss
after tax of GBP6.3 million.
Net assets per share at the year end are 160 pence (2015: 192
pence).
The continued reorganisation programme has led to GBP0.8 million
(2015: GBP2.5 million) being generated from the disposal of hire
fleet assets. Hire fleet additions have been cut back to GBP0.8
million (2015: GBP4.8 million) during the year and have been
concentrated on the Crestchic business.
Trade receivables have reduced to GBP7.1 million (2015: GBP8.1
million), impacted by the decrease in revenue during the year. Cash
and cash equivalents decreased marginally to GBP3.7 million (2015:
GBP3.9 million) with the opportunity for good cash generation
remaining in the current financial year.
Notwithstanding the trading losses seen during the year, the
cost reductions and the proceeds from the placing and open offer
have led to net debt (financial liabilities less cash and cash
equivalents) decreasing to GBP9.5 million (2015: GBP14.3 million).
Net gearing, calculated as net debt divided by total equity,
decreased from 39.8% to 22.7%. A further reduction in net debt is
targeted for 2017.
Cash flow
The Group continued to generate cash from operations totalling
GBP1.8 million (2015: GBP6.9 million) during the year. From this,
GBP0.8 million (2015: GBP4.1 million) was used to purchase new hire
fleet equipment while GBP0.8 million (2015: GBP2.5 million) was
generated from the sale of surplus assets.
The Group closely monitors cash management and prioritises the
repatriation of cash to the UK from its overseas subsidiaries.
The cash inflow from financing activities of GBP0.1 million
(2015: GBP3.6 million outflow) included proceeds from the placing
and open offer of GBP5.3 million and bank and hire purchase
repayments of GBP5.1 million. The bank covenants were revised due
to the continued lower EBITDA generated by the Group and all
covenant tests were passed during the period up to the approval
date of these financial statements.
The Group paid out GBP1.3 million (2015: GBP0.9 million) of
deferred consideration.
Income tax expense
The overall income tax charge for the year totalled GBP0.8
million (2015: GBP0.4 million credit). If unutilised tax losses of
GBP1.6 million had been recognised as a deferred tax asset the
overall tax would have been a credit of GBP0.8 million. These
losses relate to the Group's Australian entities and a deferred tax
asset has prudently not been recognised at this balance sheet date
but the losses are available to be utilised against future profits.
Any future recognition of a deferred tax asset will be dependent on
these future profits by jurisdiction becoming more certain.
The Group manages taxes such that it pays the correct amount of
tax in each country that it operates in, utilising available
reliefs and engaging with local tax authorities and advisors as
appropriate.
STRATEGY
The Northbridge strategy is to consolidate and build its
specialist industrial equipment businesses by:
-- driving growth organically through investing in the hire
fleet and improving quality systems and customer service; and
-- using partnerships to increase geographical exposure.
When considering further acquisitions, the main criteria will
be:
-- involvement in specialist electrical services or in drilling tools;
-- active in the oil and gas or power related industry; and
-- capable of supplying a worldwide customer base
In achieving this strategy, we will be able to capitalise on the
market opportunity to become a significant industrial services
business serving an international market. The Board reviews this
strategy periodically and believes it is still the correct one for
the Group.
OUTLOOK
There can be no doubt as to the severity of the downturn
affecting the oil and gas industry over the last two years and,
like others, this has had an impact on our current trading. It has
also conditioned us to look more sceptically at the pace of the
future recovery and "lower for longer" remains the oil and gas
industry's mantra. However, we do believe that there is a better
trading environment on the way, supported by a more stable oil
price as a result of more co-ordination by producer nations and a
reducing surplus. In addition, the Initial Public Offering of Saudi
Aramco scheduled for 2018/19 will also assist in the maintenance of
an orderly market for the immediate future.
The combination of cost reductions implemented by the
international oil companies and the oil service majors has reduced
the break-even level for new oil production. This means that more
drilling activity by the E&P sector is likely over the next few
years, as reserves, which are currently at a 70-year low, are
replenished. Activity in the shipyards, where we provide power
testing equipment, will take a bit longer to recover as our
involvement comes more towards the end of the investment in new and
recommissioned oil rigs, FPSOs, etc.
Northbridge is very well placed to benefit from a future
recovery. While remaining cash generative, we have completed our
restructuring and now have a much lower cost base with a large,
well maintained and modern hire fleet and manageable gearing. We
have also made further modest investment in the US and Chinese
loadbank markets laying the foundation for future growth. The
separation of the two trading subsidiaries into activity based
management will enable better focus going forward which will ensure
all opportunities can be fully exploited. Having retained all our
operating bases during the downturn and maintained relationships
with all our customers, additional revenue coupled with our high
operational gearing will support bottom line growth.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
2016 2015
Note GBP'000 GBP'000
-------------------------------------- ----- --------- ---------
Revenue 2 23,786 34,090
Cost of sales (14,653) (19,286)
-------------------------------------- ----- --------- ---------
Gross profit 9,133 14,804
Operating costs
-------------------------------------- ----- --------- ---------
Excluding exceptional items (12,688) (15,549)
Exceptional items 3 (1,358) (7,189)
-------------------------------------- ----- --------- ---------
Total operating costs (14,046) (22,378)
-------------------------------------- ----- --------- ---------
Loss from operations (4,913) (7,934)
Finance income - 8
Finance costs (591) (655)
-------------------------------------- ----- --------- ---------
Loss before income tax excluding
exceptional items (4,146) (1,392)
Exceptional items 3 (1,358) (7,189)
-------------------------------------- ----- --------- ---------
Loss before income tax (5,504) (8,581)
Income tax expense 4 (794) 430
-------------------------------------- ----- --------- ---------
Loss for the year attributable
to the equity holders of the parent (6,298) (8,151)
Other comprehensive income/(loss)
Exchange differences on translating
foreign operations 6,846 (1,156)
-------------------------------------- ----- --------- ---------
Other comprehensive income/ (loss)
for the year, net of tax 6,846 (1,156)
-------------------------------------- ----- --------- ---------
Total comprehensive income/ (loss)
for the year attributable to equity
holders of the parent 548 (9,307)
-------------------------------------- ----- --------- ---------
Loss per share
- basic (pence)* 5 (26.2) (42.8)
- diluted (pence)* 5 (26.2) (42.8)
-------------------------------------- ----- --------- ---------
* 2015 figures restated due to the effect of the issue of shares
at a lower than market price in 2016.
All amounts relate to continuing operations.
CONSOLIDATED BALANCE SHEET
As at 31 December 2016
2016 2015
------------------ ------------------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
ASSETS
Non-current assets
Intangible assets 14,094 12,797
Property, plant and equipment 35,623 35,556
Deferred tax asset - 316
-------------------------------- -------- -------- -------- --------
49,717 48,669
------------------------------- -------- -------- -------- --------
Current assets
Inventories 3,515 4,440
Trade and other receivables 9,008 9,933
Cash and cash equivalents 3,704 3,852
-------------------------------- -------- -------- -------- --------
16,227 18,225
------------------------------- -------- -------- -------- --------
Total assets 65,944 66,894
-------------------------------- -------- -------- -------- --------
LIABILITIES
Current liabilities
Trade and other payables 5,571 6,950
Financial liabilities 4,367 6,044
Other financial liabilities 1,123 1,160
Current tax liabilities 673 538
-------------------------------- -------- -------- -------- --------
11,734 14,692
------------------------------- -------- -------- -------- --------
Non-current liabilities
Financial liabilities 8,804 12,090
Other financial liabilities - 928
Deferred tax liabilities 3,621 3,303
-------------------------------- -------- -------- -------- --------
12,425 16,321
------------------------------- -------- -------- -------- --------
Total liabilities 24,159 31,013
-------------------------------- -------- -------- -------- --------
Total net assets 41,785 35,881
-------------------------------- -------- -------- -------- --------
Capital and reserves
attributable to equity
holders of the Company
Share capital 2,611 1,864
Share premium 27,779 23,266
Merger reserve 2,810 2,810
Foreign exchange reserve 4,529 (2,317)
Treasury share reserve (451) (451)
Retained earnings 4,507 10,709
-------------------------------- -------- -------- -------- --------
Total equity 41,785 35,881
-------------------------------- -------- -------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Foreign Treasury
Share Share Merger exchange share Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- -------- -------- --------- --------- --------- ---------
Changes in equity
Balance at 1
January 2016 1,864 23,266 2,810 (2,317) (451) 10,709 35,881
Loss for the
year - - - - - (6,298) (6,298)
Other comprehensive
income - - - 6,846 - - 6,846
--------------------- ---------- -------- -------- --------- --------- --------- ---------
Total comprehensive
income for the
year - - - 6,846 - (6,298) 548
Issue of share
capital 747 4,513 - - - - 5,260
Share option
expense - - - - - 96 96
Balance at 31
December 2016 2,611 27,779 2,810 4,529 (451) 4,507 41,785
--------------------- ---------- -------- -------- --------- --------- --------- ---------
For the year ended 31 December 2015
Foreign Treasury
Share Share Merger exchange share Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------ -------- -------- --------- --------- --------- ---------
Changes in equity
Balance at 1
January 2015 1,859 23,188 2,810 (1,161) (201) 19,928 46,423
Loss for the
year - - - - - (8,151) (8,151)
Other comprehensive
loss - - - (1,156) - - (1,156)
--------------------- ------------ -------- -------- --------- --------- --------- ---------
Total comprehensive
loss for the
year - - - (1,156) - (8,151) (9,307)
Issue of share
capital 5 78 - - - - 83
Purchase of own
shares - - - - (250) - (250)
Deferred tax
on share options - - - - - (245) (245)
Share option
expense - - - - - 96 96
Dividends paid - - - - - (919) (919)
--------------------- ------------ -------- -------- --------- --------- --------- ---------
Balance at 31
December 2015 1,864 23,266 2,810 (2,317) (451) 10,709 35,881
--------------------- ------------ -------- -------- --------- --------- --------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2016
2016 2015
GBP'000 GBP'000
------------------------------------------- --------- ---------
Cash flows from operating activities
Net loss from ordinary activities
before taxation (5,504) (8,581)
Adjustments for:
- amortisation and impairment of
intangible assets 749 5,733
- amortisation of capitalised debt
fee 117 208
- depreciation of property, plant
and equipment 6,201 5,881
- profit on disposal of property,
plant and equipment (242) (458)
- non-cash movement in deferred
consideration - (3)
- investment income - (8)
- finance costs 591 570
- share option expense 96 96
-------------------------------------------- --------- ---------
2,008 3,523
------------------------------------------- --------- ---------
Decrease in inventories 135 348
Decrease in receivables 1,903 2,796
(Decrease)/increase in payables (2,283) 306
-------------------------------------------- --------- ---------
Cash generated from operations 1,763 6,939
Finance costs (591) (655)
Taxation (351) (942)
Hire fleet expenditure (826) (4,080)
Sale of assets within hire fleet 784 2,493
-------------------------------------------- --------- ---------
Net cash from operating activities 779 3,755
-------------------------------------------- --------- ---------
Cash flows from investing activities
Finance income - 8
Payment of deferred consideration (1,252) (941)
Purchase of property, plant and
equipment (163) (494)
Sale of property, plant and equipment 86 109
-------------------------------------------- --------- ---------
Net cash used in investing activities (1,329) (1,320)
-------------------------------------------- --------- ---------
Cash flows from financing activities
Proceeds from share capital issued 5,260 83
Proceeds from bank and other borrowings - 12,957
Purchase of own shares - (250)
Repayment of bank borrowings (4,078) (13,957)
Repayment of finance lease creditors (1,053) (1,555)
Dividends paid in the year - (919)
-------------------------------------------- --------- ---------
Net from/ (used in) financing activities 129 (3,641)
-------------------------------------------- --------- ---------
Net decrease in cash and cash equivalents (421) (1,206)
Cash and cash equivalents at beginning
of period 2,175 3,427
Exchange losses on cash and cash
equivalents 392 (46)
-------------------------------------------- --------- ---------
Cash and cash equivalents at end
of period 2,146 2,175
-------------------------------------------- --------- ---------
During the period the Group acquired property, plant and hire
equipment with an aggregate cost of GBP989,000 (2015: GBP5,365,000)
of which GBPnil (2015: GBP791,000) was acquired by means of finance
leases. This includes GBP826,000 (2015: GBP4,791,000) of hire fleet
additions of which GBPnil (2015: GBP711,000) was acquired by means
of finance lease.
Cash and cash equivalents includes cash and cash equivalents as
disclosed in current assets on the balance sheet and overdraft
balances of GBP1,558,000 (2015: GBP1,677,000) held within financial
liabilities.
1. ACCOUNTING POLICIES
1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
While the financial information included in the annual financial
results announcement has been prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards as endorsed for use in the European Union
(IFRSs), this announcement does not contain sufficient information
to comply with IFRSs.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2016
or 2015, but is derived from those accounts. Statutory accounts for
the year ended 31 December 2015 have been delivered to the
Registrar of Companies and those for the year ended 31 December
2016 will be delivered following the company's annual general
meeting.
The auditors have reported on those accounts; their reports were
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
reports.
Their reports for the year end 31 December 2016 and 31 December
2015 did not contain statements under s498 (2) or (3) of the
Companies Act 2006.
1.2 BASIS OF CONSOLIDATION
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the
practical ability to direct the relevant activities of the investee
without holding the majority of the voting rights. In determining
whether de-facto control exists the company considers all relevant
facts and circumstances, including:
- The size of the company's voting rights relative to both the
size and dispersion of other parties who hold voting rights
substantive potential voting rights held by the company and by
other parties.
- Other contractual arrangements
- Historic patterns in voting attendance
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
2. SEGMENT INFORMATION
The Group currently has two main reportable segments:
-- Crestchic loadbanks and transformers - this segment is
involved in the manufacture, hire and sale of loadbanks and
transformers. It is the largest proportion of the Group's business
and generated 81% (2015: 67%) of the Group's revenue. This includes
Crestchic, NT, Crestchic France, NME, CME, CAP, NAP and China
businesses;
-- Tasman oil tools and loadcells - this segment is involved in
the hire and sale of oil tools and loadcells and contributes 19%
(2015: 31%) of the Group's revenue. This includes the TOTAU, TOTNZ,
TOTAE and NLS businesses.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that offer different products and services.
Measurement of operating segment profit or loss, assets and
liabilities
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies.
The Group evaluates performance on the basis of profit or loss
before tax.
Segment assets and liabilities include an aggregation of all
assets and liabilities relating to businesses included within each
segment. Other adjustments relate to the non-reportable head office
along with consolidation adjustments which include goodwill and
intangible assets. All inter-segment transactions are at arm's
length.
Other
Crestchic Tasman Other including
loadbanks oil tools trading consolidation 2016
and transformers and loadcells Total entities adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------------- -------------- -------- --------- -------------- --------
Revenue from external
customers 19,317 4,469 23,786 - - 23,786
Finance expense (131) (15) (146) - (445) (591)
Depreciation (3,766) (2,161) (5,927) - (274) (6,201)
Amortisation and
impairment - (57) (57) - (692) (749)
Profit/(loss) before
tax before exceptional
items 1,552 (3,648) (2,096) 2 (2,052) (4,146)
Exceptional items (236) (833) (1,069) (83) (206) (1,358)
Profit/(loss) before
tax 1,316 (4,481) (3,165) (81) (2,258) (5,504)
------------------------- ----------------- -------------- -------- --------- -------------- --------
Balance sheet
Assets 68,521 19,839 88,360 4,206 (28,263) 64,303
Liabilities (31,551) (13,350) (44,901) (3,997) 26,380 (22,518)
------------------------- ----------------- -------------- -------- --------- -------------- --------
36,970 6,489 43,459 209 (1,883) 41,785
------------------------- ----------------- -------------- -------- --------- -------------- --------
Non-current asset
additions
Property, plant
and equipment additions 863 126 989 - - 989
------------------------- ----------------- -------------- -------- --------- -------------- --------
The reconciling adjustments between the total segmental loss
before tax and the loss before tax of the Group include
amortisation (GBP692,000), exceptional costs (GBP289,000) and head
office expenditure (GBP1,024,000). The reconciling adjustments
between the total segmental net assets and the net assets of the
Group include the head office net assets, other trading entity net
assets and consolidation adjustments.
Other
Crestchic Tasman Other including
loadbanks oil tools trading consolidation 2015
and transformers and loadcells Total entities adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------------- -------------- -------- --------- -------------- --------
Revenue from external
customers 22,750 10,534 33,284 806 - 34,090
Finance income - 6 6 - 2 8
Finance expense (194) (32) (226) (8) (421) (655)
Depreciation (3,508) (1,912) (5,420) (76) (385) (5,881)
Amortisation and
impairment (154) (81) (235) - (5,498) (5,733)
Profit/(loss) before
tax before exceptional
items 2,075 (702) 1,373 (157) (2,608) (1,392)
Exceptional items (360) (986) (1,346) (850) (4,993) (7,189)
Profit/(loss) before
tax 1,715 (1,688) 27 (1,007) (7,601) (8,581)
------------------------- ----------------- -------------- -------- --------- -------------- --------
Balance sheet
Assets 55,223 20,781 76,004 4,333 (13,443) 66,894
Liabilities (24,983) (12,357) (37,340) (4,108) 10,435 (31,013)
------------------------- ----------------- -------------- -------- --------- -------------- --------
30,240 8,424 38,664 225 (3,008) 35,881
------------------------- ----------------- -------------- -------- --------- -------------- --------
Non-current asset
additions
Property, plant
and equipment additions 1,600 3,675 5,275 90 - 5,365
------------------------- ----------------- -------------- -------- --------- -------------- --------
The reconciling adjustments between the total segmental loss
before tax and the loss before tax of the Group include a trading
loss from other trading entities (GBP157,000), amortisation
(GBP1,255,000), exceptional costs (GBP5,843,000) and head office
expenditure (GBP1,188,000). The reconciling adjustments between the
total segmental net assets and the net assets of the Group include
the head office net assets, other trading entity net assets and
consolidation adjustments.
External revenue Non-current
by location assets
of sale origination by location
---------------------- ------------------
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- ---------- -------- --------
UK 10,700 15,341 11,819 11,502
Australia 1,203 4,427 5,022 5,485
United Arab Emirates 4,963 4,726 11,679 11,319
Azerbaijan - 715 - -
Singapore 3,944 4,831 5,272 5,985
New Zealand 702 2,186 10,139 8,833
Belgium 1,408 1,221 4,094 4,263
China 511 110 1,685 959
Other 355 533 7 7
--------------------- ---------- ---------- -------- --------
23,786 34,090 49,717 48,353
--------------------- ---------- ---------- -------- --------
External revenue External revenue
by type by type
------------------ ------------------
2016 2015 2016 2015
GBP'000 GBP'000 % %
------------------ -------- -------- -------- --------
Hire of equipment 15,827 18,970 66.5 55.6
Sale of product 7,959 15,120 33.5 44.4
------------------ -------- -------- -------- --------
23,786 34,090 100.0 100.0
------------------ -------- -------- -------- --------
3. EXCEPTIONAL COSTS
Exceptional costs incurred during the year were as follows:
2016 2015
GBP'000 GBP'000
Acquisition costs(1) 103 227
Reorganisation costs(2) 654 1,266
Redundancy costs(3) 497 768
Impairment of intangible assets(4) - 4,729
Banking costs(5) 104 199
Exceptional costs 1,358 7,189
------------------------------------ -------- --------
(1) The exceptional cost in 2016 relates to Value Added Tax on
acquisition costs that have been reclaimed by Her Majesty's Revenue
and Customs. The costs on which the VAT was reclaimed were reported
as exceptional in the years that they arose. (2015: aborted
acquisition costs and costs relating to the acquisition of Tasman
Oil Tools Limited and Tasman Oil Tools Leasing Limited in
2014).
(2) During the year, the Group has continued to reorganise the
Group. The Singapore branch of its Loadcell has been closed and a
property in Australia has been vacated and created an onerous lease
(2015: The Group sold the assets of its compressor hire business in
the UK and its generator hire businesses in Dubai and Azerbaijan as
well as closing the Vietnamese branch of its Singapore based
Loadcell business). The costs associated with the closure of these
operations have been disclosed as exceptional.
(3) During the year and prior year the Group has suffered
redundancy costs relating to on-going subsidiaries that are deemed
to be exceptional.
(4) In the prior year as part of the ongoing review of the
Group's Non-current assets, the Board recognised that the
recoverable amounts relating to certain Intangible assets were less
than their carrying value. A full impairment totalling GBP483,000
was made against goodwill and customer relationships recognised on
the acquisition of Loadcell in 2011, a full impairment of
GBP2,642,000 was made against goodwill recognised on the
acquisition of Tasman Australia in 2010 and an impairment of
GBP1,604,000 was made against the goodwill recognised on the
acquisition of Tasman New Zealand in 2014.
(5) Costs associated with resetting bank covenants have been
deemed to be exceptional (2015: Debt fees relating to loans
superseded by new facilities agreed in May 2015 as well as costs
associated with resetting bank covenants have been written off
during the year and deemed to be exceptional).
4. INCOME TAX EXPENSE
2016 2015
GBP'000 GBP'000
------------------------------------------------- -------- --------
Current tax expense 518 855
Prior year under/(over) provision of tax 48 (144)
------------------------------------------------- -------- --------
566 711
Deferred tax charge/(credit) resulting
from the origination and reversal of temporary
differences 228 (1,141)
------------------------------------------------- -------- --------
Tax on profit on ordinary activities 794 (430)
------------------------------------------------- -------- --------
Factors affecting tax charge for the year
The tax assessed for the year is different to the standard rate
of corporation tax in the UK of 20% (2015: 20.25%). The differences
are explained below:
2016 2015
GBP'000 GBP'000
--------------------------------------------- -------- --------
Profit on ordinary activities before tax (5,504) (8,581)
--------------------------------------------- -------- --------
Profit on ordinary activities multiplied
by standard rate of corporation tax in the
UK of 20% (2015: 20.25%) (1,101) (1,737)
Effects of:
- income not subject to tax (215) (315)
- expenses not allowable for tax purposes 505 1,532
- difference in tax rates (84) 234
- losses not recognised as a deferred tax
asset 1,641 234
- prior year under/(over) provision of tax
and deferred tax 48 (144)
--------------------------------------------- -------- --------
Total tax charge for the year 794 (430)
--------------------------------------------- -------- --------
The standard rate of corporation tax in the UK is now 19% since
1 April 2017. The rate will decrease to 17% from 1 April 2020.
5. EARNINGS PER SHARE
2016 2015
GBP'000 GBP'000
----------------------------------- ------- -------
Numerator
Loss used in basic and diluted EPS (6,298) (8,151)
----------------------------------- ------- -------
2016 2015
Number Number
------------------------------------------ ---------- ----------
Denominator
Weighted average number of shares used in
basic EPS* 24,004,258 19,703,095
Effects of share options 19,446 -
------------------------------------------ ---------- ----------
Weighted average number of shares used in
diluted EPS* 24,023,704 19,703,095
------------------------------------------ ---------- ----------
* 2015 figures restated due to the effect of the issue of shares
at a lower than market price in 2016.
At the end of the year, the Company had in issue 1,134,099
(2015: 1,156,801) share options which have not been included in the
calculation of diluted EPS because their effects are anti-dilutive.
These share options could be dilutive in the future.
6. DIVIDENDS
2016 2015
GBP'000 GBP'000
------------------------------------------------------- ------- -------
Final dividend of nil pence (2015: 4.00 pence)
per ordinary share proposed and paid during
the year relating to the previous year's results - 735
Interim dividend of nil pence (2015: 1.00
pence) per ordinary share paid during the
year - 184
------------------------------------------------------- ------- -------
- 919
------------------------------------------------------- ------- -------
The Directors are not proposing a final dividend (2015: nil
pence), resulting in dividends for the whole year of nil pence
(2015: 1.00 pence) per share.
7. ANNUAL REPORT AND ACCOUNTS
The annual report and accounts will be posted to
shareholders shortly and will be available for members
of the public at the Company's registered office
Second Avenue, Centrum 100, Burton on Trent, DE14
2WF, and on the company's website www.northbridgegroup.co.uk.
8. ANNUAL GENERAL MEETING
The Company's Annual General Meeting is to be held
at the offices of Buchanan Communications, 107 Cheapside,
London, EC2V 6DN on 7 June 2017, commencing at 12.00
noon.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKLLAEAXEFF
(END) Dow Jones Newswires
April 25, 2017 02:00 ET (06:00 GMT)
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