TIDMNBI
RNS Number : 6888N
Northbridge Industrial Services PLC
26 September 2019
26 September 2019
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Unaudited Interim Results for the six months ended 30 June
2019
Improved Performance Accelerates - Return to Profit
Northbridge, the industrial services and rental company today is
pleased to announce its unaudited interim results for the six-month
period ended 30 June 2019.
Highlights
-- Group revenue up 33% to GBP16.8 million (2018: GBP12.6 million)
-- Gross profit significantly up by 50% to GBP7.5 million (2018: GBP5.0 million)
-- EBITDA* up materially by 90% to GBP3.4 million (2018: GBP1.8 million)
-- Cash generation from operations* up by 33% to GBP2.6 million (2018: GBP1.9 million)
-- First reported profit before tax since 2014
-- Improving conditions in the drilling tool market, with revenue up 29% year on year
-- Continuing growth in the core power reliability market
-- Operational gearing benefitting results
* - excluding the impact of IFRS 16; reconciliation included in
the Finance Director's report
Commenting on the results and the outlook, Eric Hook, Chief
Executive of Northbridge, said:
"Northbridge is starting to see the benefits from the recovery
in activity in the oil and gas markets across both our operating
divisions of Tasman and Crestchic. Northbridge's operational
gearing is also now beginning to have a significant beneficial
impact on our cash generation."
"We are confident of trading volumes for the remainder of 2019
and with a much-strengthened balance sheet, a strengthening cash
flow and further organic opportunities to grow the business, we
look forward to the future with optimism. "
For further information
Northbridge Industrial Services plc 01283 531645
Eric Hook, Chief Executive Officer
Iwan Phillips, Finance Director
Shore Capital (Nominated Adviser and Broker) 020 7408 4090
Robert Finlay / Antonio Bossi / Henry Willcocks
Buchanan 020 7466 5000
Charles Ryland / Stephanie Watson
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.
Chief Executive's statement
We are pleased to present our interim results for the six month
period to 30 June 2019.
As stated in the Trading Update issued on 2 August 2019, the
impact of a recovery in revenue has led to a significant
improvement in cash flow as well as continued improvement in
EBITDA. The gradual improvements to the stability of the oil and
gas sector, which is one of the Group's main markets has positively
impacted both of our core businesses of Crestchic Loadbanks
("Crestchic") and Tasman Oil Tools ("Tasman"). This has enabled the
Group to report its first profit before tax for the first half
since 2014 and has seen EBITDA almost double to GBP3.4 million
(2018: GBP1.8 million) since the same period last year.
The power reliability side of Crestchic started the year with
its largest ever new year order book for manufactured equipment
with invoiced sales for the period increasing 34% to GBP5.9 million
(2018: GBP3.8 million). Crestchic's rental division continued its
improving trajectory, even compared to the good first half in 2018,
which included a successful project in Russia for the World Cup,
with rental revenue up 21% to GBP7.2 million (2018: GBP5.9
million). This was aided by a continuing growth in power
reliability work, data centre investment and renewables, most
notably in Europe, and the beginnings of stronger demand from
energy projects in other parts of the world
Tasman, The Group's Oil Tools business, continued to benefit
from a recovery in the oil and gas market and its revenue, mostly
generated by higher margin rentals, increased 29%. The advantage of
our operational gearing is now beginning to make a substantial
impact on gross margins which increased to 33.9% (2018: 12.8%) and
gross profit which was up 242% to GBP1.2 million (2018: GBP0.4
million). Tasman EBITDA also turned positive for the first time in
five years. The strongest recovery is being experienced in
Australia, which is now the largest exporter of LNG in the world
and is also beginning to invest further in its local gas market.
Tasman has improved its share in this market over the downturn by
focusing on quality, service levels, customer relationships and
selective capital investment.
Cash flows from operating activities, before movements in
working capital, more than doubled to GBP3.7 million (2018: GBP1.7
million) and helped to enable further capital investment in the
hire fleet, which increased to GBP1.6 million (2018: GBP0.2
million) as the company invested into the upturn. The investment
was spread between both Crestchic and Tasman and despite the cost
to both working capital, as a result of increased orders, and hire
fleet expansion, net debt at the end of June was down to GBP8.5
million (2018: GBP8.7 million).
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, where it is mostly focussed on
resources, typically shipyards, oil and gas facilities and
mines.
Crestchic's turnover during the period was GBP13.1 million
(2018: GBP9.8 million) and gross profit was GBP6.3 million (2018:
GBP4.6 million). Underlying this performance was a change in
revenue mix, with a recovery in the higher margin rental activity
turnover to GBP7.2 million (2018: GBP5.9 million). Sales of
manufactured units were substantially higher than the previous year
at GBP5.9 million (2018: GBP3.8 million) and represent an
improvement in demand in some of our markets (noticeably the USA
and Europe). There is evidence that the market recovery in the oil
and gas market is complementing the additional growth from our
traditional power reliability market.
Rental in the UK and Western Europe continues to perform well,
and we have enjoyed a recovery in the Middle East. The overall
result for rental in the half year was an improvement from 2018,
which benefitted from the FIFA World Cup. The new venture in the
USA continued its progress and is expected to provide a long-term
growth opportunity for Crestchic. The relocation of the
underutilised equipment from the Asia-Pacific region is in place
and this doubled our fleet size in North America at minimal
cost.
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. Investment in this type of Big Data is likely to grow for
many years to come, providing further opportunity to Northbridge.
We are now seeing interest for this service further afield.
Tasman Oil Tools
In total, our oil tool rental operations in Australia, New
Zealand, Asia Pacific and the Middle East have seen a sea change in
their fortunes as the price of crude oil has stabilised and
exploration and production activities begin to recover. This has
been most noticeable in Australia where there is a renewed focus on
gas and LNG exports
Tasman suffered during the downturn in the oil market over the
last 4 years but is now showing year on year improvements on a
consistent basis. Total revenue in the six months was up 29% to
GBP3.7 million (2018: GBP2.8 million). The majority of this revenue
is derived from rental and the operational gearing this gives us
began to show real benefits with gross margins up 242%. EBITDA
showed significant gains to move into positive territory for the
first time in five years.
Australia performed particularly well in the period with rental
revenue up a further 32% following the 90% improvement from the
first half of 2017 to the first half of 2018. As our market share
has grown in this region, we have continued to invest in hire fleet
equipment, and have maintained our focus on quality, service
levels, and customer relationships.
Rental rates remain lower compared with earlier years but there
are signs that prices have now stabilised and will begin to improve
in the coming years. 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 grow more significantly.
The Joint Venture in Malaysia with our local partner, Olio
Resources SDN BHD, has now been trading for more than a year.
Market share is improving, and volumes are also increasing, we are
in a strong position in relation to the main market players and we
will benefit from these relationships in the future. Whilst the
Joint Venture is currently unprofitable, we believe this will
change as contracts are renewed on more favourable terms and
volumes improve. The Joint Venture's revenue for the first 6 months
was GBP1.4 million (2018: GBP0.7 million) and the after-tax loss
consolidated in these accounts is GBP0.3 million (2018: GBP0.1
million).
Outlook
There has now been a significant improvement in the Group's
performance, as our traditional energy markets begin to improve,
and this has benefitted both Crestchic and Tasman. In addition, the
new markets which Crestchic was able to exploit during the
downturn, most noticeably in data centres and North America, remain
available to us and will also provide additional future growth.
We are confident of trading volumes for the remainder of 2019
and with a much-strengthened balance sheet, a growing cash flow and
further organic opportunities to grow the business, we look forward
to the future with optimism.
Eric Hook
Chief Executive
26 September 2019
Finance Director's report
Revenue and profit before tax
The Group's revenues are derived principally from the rental of
its hire fleet and also from the sale of manufactured equipment.
Rental revenue made up 62% of total revenue in the first half of
2019 compared to 67% in 2018. This change is due to the relative
increase in revenue from both streams with sales revenue increasing
by 52% compared to 24% for hire.
The rental margin increased from 40% to 48% mainly due to a
relatively stable depreciation charge against much improved
revenue.
Operating costs increased from GBP6.1 million to GBP6.7 million
due to costs arising from the new Tasman venture servicing the
Asian market outside Malaysia from Singapore as well as some staff
cost increases.
Balance sheet, debt and cashflow
Hire fleet additions have risen to GBP1.6 million in the year
(2018: GBP0.2 million). The 2019 additions include the completion
of the oil tool asset purchase from a distressed competitor in
South East Asia that was mainly undertaken in late 2018, new oil
tools for projects in Australia in the second half of 2019 and some
smaller Loadbanks for the data centre market.
Inventory levels have decreased since the previous year end to
GBP3.9 million (2018: GBP4.3 million) mainly due to finished goods
either sold to customers or transferred to the hire fleet.
Trade and other receivables have increased from GBP7.9 million
at the previous year end to GBP9.9 million at the end of June. This
is mainly due to the high level of revenue generated in the second
quarter of 2019 with debtor days remaining in line with previous
periods.
Period end net debt* (cash balances less financial liabilities)
stood at GBP8.5 million (2018 year end: GBP8.7 million) which
includes GBP3.9 million of debt convertible to equity at 125 pence
per share. Net debt has decreased to GBP7.0 million by 31 August
2019 due to an expected unwinding of working capital.
The Group's leverage, as calculated by dividing net debt* by
twelve month rolling pre-exceptional EBITDA*, has decreased from
1.9 as at 31 December 2018 to 1.4 as at 30 June 2019. Excluding the
convertible debt the leverage is 0.8.
The Group continued to increase the cash generated from
operating activities* which totalled GBP2.6 million during the
period (2018: GBP1.9 million).
IFRS 16
IFRS 16 addresses the accounting for leases and requires lessees
to recognise all leases on its balance sheet with limited
exemptions. This results in the recognition of a right-of-use asset
and corresponding liability on the balance sheet, with the
associated depreciation and interest expense being recorded in the
income statement over the lease period. Limited exemptions apply
for short-term leases (leases with a term of 12 months or less) and
low value leases. The payments for the exempt leases are recognised
as an expense in the income statement on a straight-line basis over
the lease term.
The Group has adopted IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
(GBPnil) is recognised in retained earnings at 1 January 2019.
Accordingly, the comparative information has not been restated and
continues to be reported under IAS 17 'Leases' and IFRIC 4
'Determining Whether an Arrangement contains a Lease'.
On transition to IFRS 16 the Group recognised an additional
GBP868,000 of right-of-use assets and GBP868,000 of lease
liabilities. As at 30 June 2019 the right-of-use asset recognised
is GBP650,000 with a corresponding lease liability of
GBP650,000.
30 June 2019
30 June 2019 excluding IFRS 30 June 2018
as reported IFRS 16 impact 16 impact as report
EBITDA 3,597 218 3,379 1,778
------------- --------------- ---------------- -----------------
Cash generated
from operations 2,782 218 2,564 1,931
------------- --------------- ---------------- -----------------
30 June 2019
30 June 2019 excluding IFRS 31 December 2018
as reported IFRS 16 impact 16 impact as report
------------- --------------- ---------------- -----------------
Net debt 9,183 650 8,533 8,694
------------- --------------- ---------------- -----------------
* All ratios used in this report use the 2019 figures after
adjusting for the impact of IFRS 16 so that they are directly
comparable with the 2018 reported figures.
Iwan Phillips
Finance Director
26 September 2019
Consolidated statement of comprehensive income
For the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Revenue 16,759 12,594 26,936
Cost of sales (9,268) (7,589) (15,674)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Gross profit 7,491 5,005 11,262
Operating costs (6,741) (6,087) (12,100)
Impairment loss on trade receivables:
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Excluding exceptional costs - - (154)
Exceptional cost - - (712)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Total impairment loss on trade receivables - - (866)
Share of post-tax results of joint ventures (349) (139) (364)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Profit/(loss) from operations 401 (1,221) (2,068)
Finance costs (379) (288) (654)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Profit/(loss) before tax excluding exceptional cost 22 (1,509) (2,010)
Exceptional cost - - (712)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Profit/(loss) before taxation 22 (1,509) (2,722)
Income tax (charge)/credit (144) 37 313
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss for the period attributable to the equity holders of the parent (122) (1,472) (2,409)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Other comprehensive income
Exchange differences on translating foreign operations (130) (473) 638
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Other comprehensive income for the period, net of tax (130) (473) 638
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Total comprehensive income for the period attributable to equity
holders of the parent (152) (1,945) (1,771)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
Loss per share attributable to the equity holders of the parent 2
- basic (pence) (0.4) (5.7) (8.9)
- diluted (pence) (0.4) (5.7) (8.9)
--------------------------------------------------------------------- ------ ----------- ----------- -------------
All amounts relate to continuing operations.
Consolidated balance sheet
As at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ---------- ---------- ------------
ASSETS
Non-current assets
Intangible assets 12,177 12,277 12,333
Property, plant and equipment 28,648 26,903 28,872
40,825 39,180 41,205
----------------------------------------------------- ---------- ---------- ------------
Current assets
Inventories 3,938 4,031 4,288
Trade and other receivables 9,965 8,560 7,902
Cash and cash equivalents 3,259 3,855 2,302
----------------------------------------------------- ---------- ---------- ------------
17,162 16,446 14,492
----------------------------------------------------- ---------- ---------- ------------
Total assets 57,987 55,626 55,697
----------------------------------------------------- ---------- ---------- ------------
LIABILITIES
Current liabilities
Trade and other payables 6,380 6,000 5,306
Financial liabilities 4,161 2,494 3,145
Current tax liabilities 729 674 660
----------------------------------------------------- ---------- ---------- ------------
11,270 9,168 9,111
----------------------------------------------------- ---------- ---------- ------------
Non-current liabilities
Financial liabilities 8,281 7,528 7,851
Deferred tax liabilities 2,198 2,765 2,276
----------------------------------------------------- ---------- ---------- ------------
10,479 10,293 10,127
----------------------------------------------------- ---------- ---------- ------------
Total liabilities 21,749 19,461 19,238
----------------------------------------------------- ---------- ---------- ------------
Total net assets 36,238 36,165 36,459
----------------------------------------------------- ---------- ---------- ------------
Equity attributable to equity holders of the parent
Share capital 2,811 2,811 2,811
Convertible debt option reserve 201 - 201
Share premium 29,950 29,974 29,950
Merger reserve 2,810 2,810 2,810
Treasury share reserve (451) (451) (451)
Foreign exchange reserve 3,518 2,537 3,648
Retained earnings (2,601) (1,516) (2,510)
----------------------------------------------------- ---------- ---------- ------------
Total equity 36,238 36,165 36,459
----------------------------------------------------- ---------- ---------- ------------
Consolidated cash flow statement
For the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ----------- ------------
Cash flows from operating activities
Net loss from ordinary activities before taxation 22 (1,509) (2,722)
Adjustments for:
- amortisation and impairment of intangible
fixed assets 194 354 576
- amortisation of capitalised debt fee 84 78 126
- depreciation of property, plant and equipment 3,002 2,645 5,379
- profit on disposal of property, plant and
equipment (195) (343) (537)
- share of post-tax results of joint ventures 349 139 364
- finance costs 379 288 654
- share option expense 30 30 50
------------------------------------------------------ ----------- ----------- ------------
3,865 1,682 3,890
Decrease/(increase) in inventories 350 (609) (853)
(Increase)/decrease in receivables (2,147) 694 1,507
Increase/(decrease) in payables 714 164 (258)
------------------------------------------------------ ----------- ----------- ------------
Cash generated from operations 2,782 1,931 4,286
Finance costs (349) (288) (574)
Taxation (156) (460) (651)
Increase in receivables from joint ventures (266) (62) (402)
Hire fleet expenditure (1,649) (236) (4,469)
Sale of assets within hire fleet 309 443 844
------------------------------------------------------ ----------- ----------- ------------
Net cash from/(used in) operating activities 671 1,328 (966)
------------------------------------------------------ ----------- ----------- ------------
Cash flows from investing activities
Payment of deferred consideration - (1,053) (1,130)
Sale of property, plant and equipment 21 5 8
Purchase of property, plant and equipment (200) (32) (243)
------------------------------------------------------ ----------- ----------- ------------
Net cash used in investing activities (179) (1,080) (1,365)
------------------------------------------------------ ----------- ----------- ------------
Cash flows from financing activities
Proceeds from share capital issued - 2,395 2.371
Proceeds from bank and other borrowings 1,679 9,152 10,923
Debt issue costs (26) (413) (437)
Repayment of bank and other borrowings (825) (8,547) (9,116)
Payment of finance lease creditors (364) (149) (299)
Net cash from financing activities 464 2,438 3,442
------------------------------------------------------ ----------- ----------- ------------
Net increase in cash and cash equivalents 956 2,686 1,111
Cash and cash equivalents at beginning of
period 2,302 1,173 1,173
Exchange gains/(losses) on cash and cash equivalents 1 (4) 18
------------------------------------------------------ ----------- ----------- ------------
Cash and cash equivalents at end of period 3,259 3,855 2,302
------------------------------------------------------ ----------- ----------- ------------
Notes to the unaudited interim statements
For the six months ended 30 June 2019
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 2018.
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 2019.
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 2019 and the six months ended 30 June 2018 has
not been audited.
The financial information for the year ended 31 December 2018
does not constitute the full statutory accounts for that period.
The annual report and financial statements for 2018 has been filed
with the Registrar of Companies.
The Independent Auditor's Report on the annual report and
financial statement for 2018 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 2019 was
approved by the Board of Directors on 26 September 2019.
2. Earnings per share
The earnings per share figure has been calculated by dividing
the loss after taxation, GBP122,000 (2018: GBP1,472,000), by the
weighted average number of shares in issue, 27,899,602 (2018:
25,999,050).
At the end of the period, the Company had in issue 2,119,451
(2018: 1,819,451) share options and GBP4,000,000 of convertible
loan notes which can be converted to 3,200,000 (2018: 3,200,000)
ordinary shares at a price of 125 pence per share which have not
been included in the calculation of the diluted earnings per share
because their effects are anti-dilutive. These share options and
convertible loan notes could be dilutive in the future.
3. Dividends
No interim dividend (2018: nil) will be paid to
shareholders.
4. 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.
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END
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