LONDON (Alliance News) - Industrial services and rental company Northbridge Industrial Services PLC said on Monday it swung to loss in 2015 due to the downturn in spending by oil and gas companies, adding it will not be offering a final dividend to shareholders and will raise further equity in a share placing and open offer.
Northbridge posted a pretax loss of GBP8.6 million for the year ended December 31 from a profit of GBP6.3 million a year earlier, as revenue fell to GBP33.1 million from GBP44.9 million and the company incurred GBP22.4 million in operating costs, up from GBP14.9 million a year earlier.
The increase in operating expenses was due to the costs of exiting non-core businesses, the sale of surplus assets, impairment of intangible assets and the cost reduction exercise, Northbridge said, as it accelerated the rationalisation of its structure and product offering to put it in a "much stronger position" for when the trading environment improves.
As such, the company said it is not proposing a final dividend, meaning its full year dividend is 1.00 pence, down from 6.20p for 2014.
"As previously announced the dramatic fall in the price of oil during 2015 was the single biggest event to impact Northbridge's trading performance," said Chief Executive Eric Hook.
"Our rental operations in Australia, New Zealand, the Middle East and the Asia Pacific region bore the brunt of the decline in demand for drilling tools and load testing equipment focused towards the oil and gas sector. Rental is the most profitable and cash generative part of Northbridge and with high operational gearing; a decline in this income stream disproportionately affects profit and cash flow," Hook added.
The company said the price of crude oil continued to fall from the start of 2016, hitting a nine year low in January, and said the oil price is unlikely to recover materially until supply and demjand are back in balance.
"The market's overwhelming assumption now is that a recovery is unlikely to happen before 2017," Northbridge said.
Northbridge said in light of the difficult trading environment it was proposing raising funds through a share placing and open offer.
Northbridge said it plans to raise between GBP4.0 million and GBP4.5 million in the placing, consisting of 1.8 million shares placing firm and up to a further 4.2 million shares being placed subject to shareholder approval. The placing will be an accelerated bookbuild, and the shares will be placed at a price of 75.00p per share.
Northbridge said an additional GBP1.1 million is expected to be raised by an open offer to existing shareholders, on the basis of two new shares for every 25 existing shares held by shareholders as at last Friday.
The directors of Northbridge have indicated that they, together with their associated funds, intend to participate in the placing and in the open offer to a total of approximately GBP1.1 million.
The book-building process is being carried out by Stockdale Securities Ltd acting as bookrunner.
Northbridge said the funds should strengthen the balance sheet going forward.
Shares in Northbridge were down 11% at 76.00p on Monday morning.
By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland
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