TIDMNBI
RNS Number : 0224S
Northbridge Industrial Services PLC
28 September 2017
28 September 2017
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Unaudited Interim Results for the six months ended 30 June
2017
Northbridge, the industrial services and rental company today
announces its unaudited interim results for the six month period
ended 30 June 2017.
Key Points
-- Group revenue higher at GBP12.0 million (2016: GBP11.8 million)
-- EBITDA (pre-exceptional), GBP1.4 million (2016: GBP1.6 million)
-- No exceptional charges (2016: GBP0.6 million)
-- Positive cash generation from operations of GBP0.6 million (2016: GBP1.7 million)
-- Reduced operating loss of GBP2.0 million (2016: GBP2.4 million)
-- Net debt GBP9.5 million (GBP8.4 million at 30 June 2016;
GBP9.5 million at 31 December 2016)
-- Gradually improving conditions within elements of both divisions
o Factory order intake in Crestchic substantially up from H2
2016
o Manufacturing gross margins benefitting from improved
efficiency
o Improvement in Tasman Oil Tools; rental revenue up 18% in
constant currency terms
o New oil tool rental Joint Venture established in Malaysia to
commence trading 1 October 2017
Commenting on the results and the outlook, Eric Hook, Chief
Executive of Northbridge, said:
"Northbridge has seen some modest revenue improvements in our
oil tool rental market, and those other areas of the business where
we do have some direct influence are also performing well. However,
the prolonged downturn in the oil and gas market continues to hold
back some of our other rental revenues, in particular larger
loadbank projects outside Europe which have been largely absent
during the middle of 2017.
We look forward to the commencement of trading on 1(st) October
of our oil tools joint venture with our Malaysian partners, Olio
Resources SDN BHD. The JV will service the oil tool rental market
in Malaysia, Myanmar, Brunei, Indonesia, Cambodia, Laos, Thailand
and Singapore and initial order levels are encouraging. Taking this
together with some of our other new initiatives we remain positive
for the longer-term prospects for our business."
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,
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 statement
We are pleased to present our interim results for the 6-month
period to 30 June 2017.
As stated in the trading update issued on 2 August 2017,
sentiment in the oil and gas industry has continued its gradual
improvement since the last quarter of 2016, and a degree of pricing
stability in crude oil is evident, but the pace of recovery remains
slow. Investment in exploration, production and distribution still
lags behind this sentiment and, despite reductions in supply,
surplus oil stocks are still at a high level. As a result, whilst
we have benefitted from a modest improvement in oil tool revenues
from the record lows of 2016, the larger power related projects
continue to be affected by delays and cancellations.
Having taken the necessary steps to right size the business and
with the Group continuing to generate cash, we continue to be
focussed on managing the businesses into a stronger recovery. A
substantial proportion of our businesses are still influenced by
the fortunes of the oil and gas industries, however we also have an
important and growing interest in renewable power generation, where
we have had some notable successes and see attractive longer-term
potential.
Northbridge now has two core activities, Crestchic Loadbanks and
Tasman Oil Tools, having rationalised the group significantly over
the last two years.
Crestchic is a specialist provider of electrical equipment which
is used primarily to commission, test and service independent power
plants. It has a strong position in the power reliability market,
particularly in Western economies. In addition, it also provides
loadbanks and transformers for testing large power projects in the
rest of the world, typically shipyards, oil refineries and mines.
Crestchic has a manufacturing base in Burton on Trent in the UK,
and sells, services and rents its equipment from its depots in the
UK, Europe, the Middle East, Singapore, China and the USA.
Tasman Oil Tools is a "down hole" tool rental specialist, which
rents equipment to the Oil & Gas and Geothermal industries from
its depots in Australia, New Zealand and the Middle East, and, from
the 1 October 2017 onwards, through a new Joint Venture with Olio
Resources in Malaysia.
Financial results
Northbridge's revenue for the half year ended 30 June 2017
totalled GBP12.0 million (2016: GBP11.8 million) with gross profits
of GBP4.5 million (2016: GBP4.8 million). Oil tool revenues and
gross profit was GBP2.6 million and GBP0.1 million respectively
(2016: GBP2.2 million and GBP0.2 million). Group losses before tax
were reduced to GBP2.4 million (2016: GBP2.7 million). There were
no exceptional charges in the first six-month period of 2017 (2016:
GBP0.6 million).
Net assets at 30 June 2017 were GBP39.0 million (30 June 2016:
GBP43.6 million). The basic and diluted loss per share (LPS) was
8.9 pence (2016: 11.3 pence). Net assets per share were GBP1.51
(2016: GBP1.68) and EBITDA per share was 5.5 pence for the period
(2016: 6.3 pence).
Foreign exchange
The weakening of Sterling at the end of the first half of 2016
impacted the Group's revenues and losses. On a constant currency
basis (rebasing the 2016 results using the 2017 average exchange
rates) revenue would have decreased by 4.3% from GBP12.6 million in
2016 to GBP12.0 million in 2017 rather than increase by 1.7% as
shown in the consolidated statement of comprehensive income.
Operating costs would have decreased by 9.0% from GBP7.2 million in
2016 to GBP6.5 million in 2017 rather than the decrease of 1.1%
shown in the consolidated statement of comprehensive income.
The result of the comparatively inflated revenue and costs in
2017 is that on a constant currency basis the pre-exceptional loss
before tax would have narrowed from GBP2.5 million in 2016 to
GBP2.4 million in 2017.
Financing and cash flow
Cash flow during the period continued to be positive, despite
the continuing depressed market conditions. Cash flow from
operating activities (before movements in working capital) was
GBP1.4 million (2016: GBP1.0 million), and net cash from operating
activities was GBP0.6 million (2016: GBP1.7 million), The uplift in
factory orders compared with the previous period resulted in an
increase in working capital during the period of GBP0.8 million
(2016: decrease of GBP0.7 million).
Capital expenditure on the hire fleet remained unchanged at
GBP0.2 million (2016: GBP0.2 million).
Earnings before interest, taxation, depreciation and
amortisation (EBITDA) and before exceptional costs in the first six
months of 2017 were GBP1.4 million (2016: GBP1.7 million).
Depreciation and amortisation in the period totalled GBP3.5 million
(2016: GBP3.4 million), of which depreciation alone was GBP3.1
million (2016: GBP3.1 million).
Debt repayments
During the period, scheduled capital repayments under finance
leases of GBP0.5 million were paid (2016: GBP0.5 million) and in
addition, the scheduled repayments due under the senior debt
facility of GBP0.9 million (2016: GBP0.9 million) were also paid.
Additional funds of GBP0.6 million were drawn down to support the
current working capital increase.
The group's bank facilities are provided by RBS Bank and KBC
Bank and are due for renewal in 2019. At 30 June 2017, the Group
had GBP1.25 million of undrawn funds available on its revolving
credit facility.
Dividends
No interim dividend is being declared for 2017 (2016: Nil).
Operations
Crestchic loadbanks and transformers
The electrical equipment business of Northbridge, manufactures,
sells and rents loadbanks and transformers, and supplies two main
markets. Firstly, the developed world, where it is focussed on
supporting the power reliability and power security markets and
secondly, emerging markets (EM), where it is mostly focussed on
resources, typically shipyards, oil and gas facilities and
mines.
Total turnover during the period was GBP9.5 million (2016:
GBP9.6 million) and gross profit was GBP4.5 million (2016: GBP4.7
million). Underlying this performance was a change in mix, with a
recovery in the lower margin sales activity to GBP4.3 million
(2016: GBP3.8 million) and a continuation of the decline in demand
from emerging markets in both rental and sales. We believe that
these traditional markets for our products will return to growth
over the medium term.
Rental in the UK and Western Europe continues to perform well,
and the new rental market being developed in the USA will provide a
long-term growth opportunity for Crestchic. Following an
encouraging start to our North American rental operation in 2016,
we have consolidated on this early success and now have a wider
range of customers, including utilities and defence contractors
alongside our other industry partners. We now intend to strengthen
our position in the market by relocating a further 25MW of
loadbanks from the Far East, where utilisation is currently low.
This will double our fleet size at minimal cost and, in conjunction
with this, we have added a modest sales resource. These units are
expected to be available for rental in the North American market
towards the end of 2017.
The continuing growth in data centres throughout Western Europe
has given Northbridge two additional opportunities, firstly, in
heat load management, by using loadbanks to simulate the heat from
computer servers, and then managing and proving the backup power
sources. Investments in this type of "big data" is likely to grow
for many years to come.
The more recent growth in renewable power generation in advanced
economies is continuing to gather pace, and has created new markets
for our equipment and services. This has already provided
profitable contracts for us in support of the National Grid's
Balancing Services. This also represents another long-term growth
opportunity for the company and we are currently supporting this
growth through the further technical development of our
products.
Tasman Oil Tools and loadcells
Our oil tool rental operations in Australia, New Zealand and the
Middle East suffered badly during the severe downturn affecting the
oil and gas industries worldwide during 2015 and 2016. However, we
have now seen a plateau in our rental revenue, followed by a modest
improvement in the last few months. Revenue for the first
six-months of 2017 was GBP2.6 million (2016: GBP2.2 million) for
both rental and sales. Underlying this, rental on its own during
the period was GBP2.1 million (2016: GBP1.5 million). On a constant
currency basis, this represents an 18% improvement on the same
period last year. Currently volumes are still too low overall to
make a material difference, but we are pleased that these are
moving in the right direction. The relative stability in crude oil
prices currently being experienced by the industry will, in the
longer term, encourage further exploration and production. By
maintaining our infrastructure and hire fleet whilst cutting costs,
we have put the company in an advantageous position for when market
demand begins to recover more significantly.
We are also very pleased to report on the formation of our Joint
Venture in Malaysia with our local partner, Olio Resources SDN BHD.
The new company, called Olio Tasman Oil Tools SDN BHD ("OTOT") will
be 51% owned by Olio and 49% owned by Northbridge and will service
the oil tool rental market in Malaysia, Myanmar, Brunei, Indonesia,
Cambodia, Laos, Thailand and Singapore. It will begin trading on 1
October 2017 from two newly established locations in Labuan island
and Kemaman, Malaysia. Both JV partners will provide equipment for
the rental fleet and OTOT will also have access to the substantial
hire fleet of the Tasman Group. Olio Resources, a wholly owned
Malaysian group which was established in 1994, has a strong
position as an integrated solution provider in South East Asia and
already holds key contracts for the provision of oil tools to the
oil majors in Malaysia. The trading levels for the rest of 2017 are
not expected to be material to the Group's second half results.
However, initial orders have exceeded management's expectations and
2018 will benefit from a full year of the Joint Venture. Revenues
are then expected to build into the future, particularly as the oil
and gas industry recovers and more investment is directed towards
exploration and production in the region.
Outlook
The recovery in the Oil & Gas industry remains challenging
and its recovery is unlikely to be linear, and therefore our
expectations for the second half reflect this, and are likely to
show only modest improvements over the next 18 months. Despite the
prolonged downturn in Oil & Gas, other parts of the business
will begin to pick up some of the slack and in 2018 we have high
hopes of growing our North American business, our balancing
services for the UK power grid and the JV in Malaysia.
Peter Harris
Chairman
28 September 2017
Consolidated statement of comprehensive income
For the six months ended 30 June 2017
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Revenue 12,046 11,847 23,786
Cost of sales (7,559) (7,026) (14,653)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Gross profit 4,487 4,821 9,133
Operating costs
Excluding exceptional costs (6,533) (6,607) (12,688)
Exceptional costs 2 - (649) (1,358)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Total operating costs (6,533) (7,256) (14,046)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss from operations (2,046) (2,435) (4,913)
Finance income - 3 -
Finance costs (312) (315) (591)
Loss before taxation excluding exceptional costs (2,358) (2,098) (4,146)
Exceptional costs - (649) (1,358)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss before taxation (2,358) (2,747) (5,504)
Income tax credit 50 409 (794)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss for the period attributable to the equity holders of the parent (2,308) (2,338) (6,298)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Other comprehensive income
Exchange differences on translating foreign operations (539) 4,757 6,846
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Other comprehensive income for the period, net of tax (539) 4,757 6,846
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Total comprehensive income for the period attributable to equity
holders of the parent (2,847) 2,419 548
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss per share attributable to the equity holders of the parent 3
- basic (pence) (8.9) (11.3) (26.2)
- diluted (pence) (8.9) (11.3) (26.2)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
All amounts relate to continuing operations.
Consolidated balance sheet
As at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ---------- ---------- ------------
ASSETS
Non-current assets
Intangible assets 13,757 14,141 14,094
Property, plant and equipment 32,242 36,647 35,623
Deferred tax asset - 355 -
----------------------------------------------------- ---------- ---------- ------------
45,999 51,143 49,717
----------------------------------------------------- ---------- ---------- ------------
Current assets
Inventories 3,758 4,158 3,515
Trade and other receivables 8,798 8,082 9,008
Cash and cash equivalents 1,198 4,060 3,704
----------------------------------------------------- ---------- ---------- ------------
13,754 16,300 16,227
----------------------------------------------------- ---------- ---------- ------------
Total assets 59,753 67,443 65,944
----------------------------------------------------- ---------- ---------- ------------
LIABILITIES
Current liabilities
Trade and other payables 4,927 6,452 5,571
Financial liabilities 2,810 3,321 4,367
Other financial liabilities 1,126 1,327 1,123
Current tax liabilities 488 85 673
----------------------------------------------------- ---------- ---------- ------------
9,351 11,185 11,734
----------------------------------------------------- ---------- ---------- ------------
Non-current liabilities
Financial liabilities 7,932 9,161 8,804
Deferred tax liabilities 3,484 3,483 3,621
----------------------------------------------------- ---------- ---------- ------------
11,416 12,644 12,425
----------------------------------------------------- ---------- ---------- ------------
Total liabilities 20,767 23,829 24,159
----------------------------------------------------- ---------- ---------- ------------
Total net assets 38,986 43,614 41,785
----------------------------------------------------- ---------- ---------- ------------
Equity attributable to equity holders of the parent
Share capital 2,611 2,611 2,611
Share premium 27,779 27,786 27,779
Merger reserve 2,810 2,810 2,810
Treasury share reserve (451) (451) (451)
Foreign exchange reserve 3,990 2,440 4,529
Retained earnings 2,247 8,418 4,507
----------------------------------------------------- ---------- ---------- ------------
Total equity 38,986 43,614 41,785
----------------------------------------------------- ---------- ---------- ------------
Consolidated cash flow statement
For the six months ended 30 June 2017
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ----------- ------------
Cash flows from operating activities
Net loss from ordinary activities before taxation (2,358) (2,747) (5,504)
Adjustments for:
- amortisation and impairment of intangible
fixed assets 383 358 749
- amortisation of capitalised debt fee 69 66 117
- depreciation of property, plant and equipment 3,093 3,064 6,201
- profit on disposal of property, plant and
equipment (121) (143) (242)
- investment income - (3) -
- finance costs 312 315 591
- share option expense 48 48 96
------------------------------------------------------ ----------- ----------- ------------
1,426 958 2,008
------------------------------------------------------ ----------- ----------- ------------
(Increase)/decrease in inventories (260) (570) 135
Decrease in receivables 12 2,538 1,903
(Decrease)/increase in payables (566) (1,234) (2,283)
------------------------------------------------------ ----------- ----------- ------------
Cash generated from operations 612 1,692 1,763
Finance costs (312) (315) (591)
Taxation (251) (199) (351)
Hire fleet expenditure (180) (198) (826)
Sale of assets within hire fleet 175 371 784
------------------------------------------------------ ----------- ----------- ------------
Net cash from operating activities 44 1,351 779
------------------------------------------------------ ----------- ----------- ------------
Cash flows from investing activities
Finance income - 3 -
Payment of deferred consideration - (974) (1,252)
Sale of property, plant and equipment 2 197 86
Purchase of property, plant and equipment (26) (71) (163)
------------------------------------------------------ ----------- ----------- ------------
Net cash used in investing activities (24) (845) (1,329)
------------------------------------------------------ ----------- ----------- ------------
Cash flows from financing activities
Proceeds from share capital issued - 5,267 5,260
Proceeds from bank and other borrowings 599 - -
Repayment of bank and other borrowings (1,089) (3,653) (4,078)
Payment of finance lease creditors (472) (520) (1,053)
Net cash from/(used in) financing activities (962) 1,094 129
------------------------------------------------------ ----------- ----------- ------------
Net increase/(decrease) in cash and cash equivalents (942) 1,600 (421)
Cash and cash equivalents at beginning of
period 2,146 2,175 2,175
Exchange gains/(losses) on cash and cash equivalents (6) 285 392
------------------------------------------------------ ----------- ----------- ------------
Cash and cash equivalents at end of period 1,198 4,060 2,146
------------------------------------------------------ ----------- ----------- ------------
Notes to the unaudited interim statements
For the six months ended 30 June 2017
1. Basis of preparation
This interim report has been prepared in accordance with the
accounting policies disclosed in the full statutory accounts for
the year ended 31 December 2016.
These policies are in accordance with International Financial
Reporting Standards and International Accounting Standards and
Interpretations (collectively "IFRS") issued by the International
Accounting Standards Board, as endorsed for use in the European
Union, that are expected to be applicable for the year ending 31
December 2017.
The Group has chosen not to adopt IAS 34 "Interim Financial
Statements" in preparing the interim consolidated financial
information.
The financial information in this statement relating to the six
months ended 30 June 2017 and the six months ended 30 June 2016 has
not been audited.
The financial information for the year ended 31 December 2016
does not constitute the full statutory accounts for that period.
The annual report and financial statements for 2016 has been filed
with the Registrar of Companies.
The Independent Auditor's Report on the annual report and
financial statement for 2016 was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act
2006.
The interim report for the period ended 30 June 2017 was
approved by the Board of Directors on 28 September 2017.
2. Exceptional costs
The 2016 exceptional costs include GBP0.3 million of costs
incurred in closing down businesses and GBP0.3 million of
redundancy costs relating to continuing entities.
3. Earnings per share
The earnings per share figure has been calculated by dividing
the loss after taxation, GBP2,308,000 (2016: GBP2,338,000), by the
weighted average number of shares in issue, 25,899,602 (2016:
20,758,801).
The diluted earnings per share assumes all share options are
exercised at the start of the period or, if later, the date of
issue of the share options. This increased the weighted average
number of shares in issue by 63,973 (2016: nil). At the end of the
period, the Company had in issue 1,000,942 (2016: 1,407,601) share
options which have not been included in the calculation of the
diluted earnings per share because their effects are anti-dilutive,
although these share options could be dilutive in the future.
4. Dividends
No interim dividend (2016: nil) will be paid to
shareholders.
5. Interim report
Copies of the interim report are being sent to all shareholders
and are available to the public from the offices of Northbridge
Industrial Services plc at Second Avenue, Centrum 100, Burton on
Trent, Staffordshire DE14 2WF. The interim report and the interim
announcement will also be available from the Group's website at
www.northbridgegroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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