28 May 2015 07:00
For immediate release | 28 May 2015 |
Northbridge Industrial Services Plc.
("Northbridge" or the "Group")
AGM Statement
Northbridge Industrial Services plc, the industrial services and rental company will today hold its AGM at 12 noon at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. Peter Harris, the Chairman of Northbridge will make the following statement on the Group's current trading and outlook.
At the time of our preliminary announcement in April we highlighted a cyclical reduction in our oil & gas related rental revenue. This has continued and, despite a high current level of quotations and enquiries, we now see no reliable signs of any upturn for the rest of 2015.
Our Crestchic loadbank operations in Singapore and Dubai, and Tasman Oil Tools in Australia are the businesses most affected by this downturn. These are predominantly rental activities with correspondingly high operational gearing. Our loadbank business in Singapore and Dubai focuses on larger projects being carried out in shipyards and in other oil & gas facilities, where there has been a marked slowdown since the beginning of the year, with projects subject to delays, postponements and cancellations. Tasman in Australia has also suffered from significant cuts in investment by the oil & gas industry, exacerbated by merger and acquisition activity within our customer base.
The Group's other businesses, Crestchic Loadbanks in the UK and Europe, and Northbridge's transformer rental operation, have so far been unaffected by the turmoil in the energy sector, and are performing to plan with robust cash flow.
Whilst we do not believe the current downturn in the oil & gas industry will be prolonged, we nevertheless think it prudent not to assume a return to stability and growth before 2016/17. We have therefore taken steps to ensure we will be in a position to take advantage when the upturn arrives. These steps will accelerate the de-gearing of our balance sheet by a combination of reductions in capital expenditure, cost savings and the disposal of non-core and surplus assets.
In summary the actions taken so far are,
· Closure and sale of the generator rental activities in the Middle East
· Closure and sale of the air compressor rental business in the UK
· Closure of our business in Vietnam
· Sale of non-core hire fleet
· A substantial cut in hire fleet capital expenditure
· Overall head count reduction of 10%
The closure and sale of the non-core activities are expected to raise around £1.5 million in cash by the end of June and further surplus equipment has been earmarked for sale. We also expect to reduce capital expenditure over the next 18 months by a further £10.0 million. Current hire fleet capital expenditure is largely focused towards US specification loadbanks, where the market remains strong, and specialist oil tools in the Middle East to support current contracts. We have also invested in our systems and processes to share equipment internally in order to increase utilization and decrease duplication.
Following these actions, Northbridge will be focused on its two core businesses, Crestchic, in the manufacture, sale and rental of loadbanks and transformers, and Tasman Oil Tools, in the rental and management of oil & gas drilling equipment. Both these activities have extensive, modern and well maintained hire fleets, which are virtually unencumbered and, even at reduced levels of rental activity, will generate good cashflow.
Following the shakeout in the oil & gas and energy sector we will enter the new era streamlined, structurally sound and with lower costs.
In the current volatile period maintaining flexibility as well as being open to opportunities as they arise will be very important. Accordingly, we are pleased to have entered into a new £17.1 million senior multicurrency term and revolving facility agreement with Royal Bank of Scotland Plc and KBC Bank NV. This four year agreement incorporates a £7.1 million Multicurrency Term Loan and a £10 million Revolving Facility. In addition we have entered into a £5.75 million ancillary facility agreement. Whilst these facilities are subject to normal banking covenants and are available for general corporate purposes, they also provide further scope for growing the businesses should these opportunities arise.
In the event of the downturn being further prolonged, our actions are aimed to enable us to become materially financially ungeared by the end of 2016, with substantial freehold properties and good cash flow.
The Directors expect the Group to be lossmaking during the first half of 2015. We have very significantly reduced our expectations for the year as a whole, but expect the Group to remain profitable and cash generative in 2015.
For further information
Northbridge Industrial Services plc 01283 531645
Eric Hook, Chief Executive Officer
Craig Robinson, Finance Director
Westhouse Securities Limited (Nominated Adviser and Broker) 020 7601 6100
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 to a non-cyclical customer base. With offices or agents in the UK, US, Dubai, Belgium, Germany, France, Australia, Singapore, India, Brazil, Korea and Azerbaijan, Northbridge has a global customer base. This includes utility companies, the oil and gas sector, shipping, 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 recorded increased earnings and dividends based on providing a high level of service, responsiveness and flexibility to customers. It has grown by the acquisition of companies in the UK, Dubai, Azerbaijan, Australia, Belgium, Singapore and New Zealand and through investing further in those acquired companies to make them more successful. Northbridge continues to seek suitable businesses for acquisition across the world.