29 Sep 2009 07:00
29 September 2009
Northbridge Industrial Services Plc.
("The Group" or "Northbridge")
Unaudited Interim Results for the six months ended 30 June 2009
Northbridge Industrial Services plc, the industrial services and rental company today announces its unaudited interim results for the six month period ended 30 June 2009.
Financial Highlights
Profit before tax up 8.3% to £1.1 million (2008: £1.0 million)
Basic earnings per share up 8.1% to 10.7 pence (2008: 9.9 pence) and diluted earnings per share of 10.6 pence (2008: 9.7 pence)
Gross Margin up by 9.9% to 64.0% (2008: 54.1%)
Group Revenue down 11.2% to £6.1million (2008: £6.9 million)
Strong cash position with net operational cash inflow of £2.0 million (2008: £0.7 million)
Successful open offer to shareholders raising £1.5 million after costs
Interim dividend increased by 7.7% to 1.4 pence (2008: 1.3 pence)
Operational Highlights
Strong growth in higher margin rental revenues, up 38% compared with first half of 2008.
Continuing good performance from Northbridge Middle East and RDS
Significant contract win by Northbridge Middle East
Acquisition of a controlling interest in Tyne Technical Equipment Rental in Dubai
Further investment in the Group's hire fleet of £2.9 million (2008 £0.74 million), including acquisition of a high pressure/high capacity compressor rental fleet from Sullair for £1.2 million
Established sales capability in India following encouraging enquiry levels
Eric Hook, Chief Executive Officer, commented:
"We expect the Group to turn in a solid performance for the whole of 2009 despite the economic conditions, and based on enquiries and forward orders we already expect a strong 2010".
For more information please contact:
| Northbridge Industrial Services plc Eric Hook, CEO / Ash Mehta, Finance Director | 01283 531 645 |
| Smith & Williamson Corporate Finance Limited (Nominated Adviser) Azhic Basirov / David Jones | 020 7131 4000 |
| Arbuthnot Securities Limited (Broker) Alasdair Younie / Ed Burbidge | 020 7012 2000 |
| Buchanan Communications Charles Ryland / James Strong | 020 7466 5000 |
Chairman's statement
I am pleased to report a period of further good progress in the Group's trading for the six months ended 30 June 2009 and strategic objectives being achieved.
Against a background of continued economic uncertainty the Group's businesses have held up well.
The Group's higher margin rental business is still experiencing good growth and the proportion of rental in the overall revenue mix is now well over 50%, leading to a substantial increase in the Group's gross margin. We are reaping the benefits of our ongoing investment in the Group's hire fleet over previous years. This level of expansion has continued into 2009 with a further investment of £1.7 million together with the £1.2 million acquisition of compressors which added to our portfolio of products.
Although sales of manufactured units by Crestchic, our largest subsidiary, are as expected lower than last year's record levels, we are still receiving an encouraging level of sales enquiries.
Northbridge Middle East ("NME"), which started trading in 2007, continues to grow rapidly and in April 2009 won a substantial rental contract to provide generators, transformers and associated equipment to the Jabali Salab zinc mine in Yemen. This contract will commence fully in January 2010 and is due to increase to the maximum level during 2010. It includes a minimum service period which has recently been increased from 12 months to 36 months. In April 2009, NME also acquired Tyne Technical Equipment Rental Services ("TTERS"), a Dubai registered company whose principal business is the rental of generators and the sale of associated services to the infrastructure and oil and gas industries in the United Arab Emirates.
RDS (Technical) Ltd, ("RDS") which supplies generators and associated equipment to the oil and gas industry in the Caspian Region, continued to perform well. A new phase of investment planned to start in 2010 will benefit the Company next year and beyond.
The Group's cashflow has been very strong in the first half, helped by the growth in rental activities. Opportunities for further rental growth are encouraging, particularly overseas, and to help fund this potential the Group raised additional capital via an open offer of new ordinary shares to existing shareholders in June 2009 raising £1.52 million before costs. During the period the Group purchased an existing specialist compressor hire fleet from Sullair at a cost of £1.2 million, 90 per cent of which was financed by a five year hire purchase agreement with Lloyds Banking Group.
Financial results
Northbridge's revenue for the half year was £6.1 million (2008: £6.9 million) with gross profits of £3.9 million (2008: £3.7 million). Profit before taxation was £1.1 million (2008: £1.0 million). Net assets at 30 June 2009 were £11.9 million (2008: £8.7 million)
Basic earnings per share increased 8.1% at 10.7 pence (2008: 9.9 pence) and diluted earnings per share increased to 10.6 pence (2008: 9.7 pence)
Financing and cash flow
During the period cash generated from operations amounted to £2.7 million (2008 £0.9 million) and a further £1.5 million was raised through the open offer. £2.9 million was invested in the hire fleet and a final payment of £0.9 million was made for the Group's business premises in Dubai. Net gearing at the end of the period was 24.0% (2008: 29.3%).
Dividends
The Board has declared an increased interim dividend of 1.4 pence (2008: 1.3 pence); an increase of 7.7%, to be paid on 13 November 2009 to shareholders on the register as at 16 October 2009.
Operations
Crestchic
Crestchic, Northbridge's main subsidiary, saw rental demand continue to grow and rental revenue increased by 31% compared with last year. This benefited the rental/sales mix in total Group turnover and resulted in the Group's gross margins increasing by 9.9% to 64.0%. Crestchic experienced a reduction in the sale of manufactured units compared with the record level of last year. This was largely down to the current economic environment which has reduced demand in some overseas markets, principally South East Asia. The additional production capacity released by the fall in sales has been utilised by building more units for the hire fleet from which we expect a long term benefit.
RDS (Technical) Ltd ("RDS")
RDS which provides generators and associated equipment to the oil and gas industry in the Caspian region continues to trade well. A new phase of investment is about to start in the region from which RDS is well placed to benefit. During the period the holding company, which was previously a Jersey registered company, has been transferred to Dubai under the control of Northbridge Middle East. At the same time a trading branch of RDS was established in the Jebel Ali Free Zone.
Northbridge (Middle East) ("NME")
NME now acts as an agent for Crestchic products and since its formation at the end of 2007 has experienced good growth, with turnover in the first six months of 2009 increasing significantly. The final payment of £0.9 million has been made on the premises in the Jebel Ali Free zone which is now shared with RDS. The portfolio of products offered by Northbridge has been enhanced by the acquisition of a 66.7% shareholding in TTERS for a consideration of £170,000 which was satisfied by £62,000 in cash and the issue of 80,000 Northbridge shares at 135 pence per share. TTERS, which is also based in Dubai, rents generators and associated equipment to the infrastructure and oil and gas industries in the United Arab Emirates. Northbridge will acquire the remaining 33.3% of the shares for a multiple of net profit in the year to March 2011 subject to a maximum cost of £680,000 giving a total maximum consideration of £850,000. Based on an assessment at 30 June 2009, £135,000 has been included as the expected fair value of the contingent consideration. In the year to December 2008 the unaudited turnover and net profits of TTERS were £600,000 and £57,000 respectively. As part of the transaction RDS has provided an intercompany loan of £250,000 for further investment in the hire fleet. In order for the maximum consideration to be payable TTERS will need to generate pre tax profits of £250,000 in the year to March 2011.
In April 2009 the new branch of RDS won a significant contract for the supply of generators, transformers and associated equipment together with a maintenance agreement to the Jabali Zinc Project in Yemen, which is controlled by Zincox Resources plc, an AIM-quoted company. The contract is due to start later this year and will increase to the maximum capacity in 2010. There is a minimum service period, at the maximum capacity, of 12 months with a value of US $2.9 million p.a. In September 2009, the contract was extended for a further 24 months.
Rest of the World
As well as having sales agents and salespeople in North America, South America, Continental Europe and the Far East, the Group has recently employed a sales representative in India. This follows a number of successful conferences and exhibitions held in India over the last few months. Based on those events we believe that India offers interesting opportunities for the Group.
Outlook
Trading has remained stable in all our activities during the first half of 2009 and our enquiry level remains high despite the global economic uncertainty. Higher margin rental continues to grow and the extra investment made this year will show early returns in 2010 and beyond. We look forward to reporting further progress in the Group's activities for the year ending 31 December 2009, and based on sales enquiries and our order book we already expect a strong 2010.
Peter Harris
Chairman
Northbridge Industrial Services plc
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2009
| 6 Months ended 30th June 2009 | 6 Months ended 30th June 2008 | Year to 31st December 2008 | |
| Unaudited | Unaudited | Audited | |
| £000's | £000's | £000's | |
| Revenue | 6,101 | 6,870 | 15,734 |
| Cost of sales | (2,195) | (3,152) | (7,711) |
| ------- | ------- | ------- | |
| Gross profit | 3,906 | 3,718 | 8,023 |
| Selling and distribution costs | (1,596) | (1,765) | (2,747) |
| Administrative expenses | (1,113) | (886) | (2,129) |
| ------- | ------- | ------- | |
| Profit from operations | 1,197 | 1,067 | 3,147 |
| Finance income | - | 17 | 23 |
| Finance costs | (78) | (50) | (203) |
| ------- | ------- | ------- | |
| Profit before income tax | 1,119 | 1,034 | 2,967 |
| Income tax expense (Note 3) | (313) | (286) | (1,049) |
| ------- | ------- | ------- | |
| Profit for the period attributable to the equity holders of the parent | 806 | 748 | 1,918 |
| Other comprehensive income: | |||
| Exchange differences on translating foreign operations | (200) | - | 178 |
| ------- | ------- | ------- | |
| Other comprehensive income for the period, net of tax | (200) | - | 178 |
| ------- | ------- | ------- | |
| Total comprehensive income for the period attributable to equity holders of the parent | 606 | 748 | 2,096 |
| ------- | ------- | ------- | |
| Earnings per share (Note 5) | |||
| - basic (pence) | 10.7 | 9.9 | 25.3 |
| - diluted (pence) | 10.6 | 9.7 | 25.0 |
| Dividend per share | 1.4p | 1.3p | 2.6p |
All revenue and operating profit is derived from continuing operations.
Northbridge Industrial Services plc
Consolidated Balance sheet as at 30th June 2009
| 30th June 2009 Unaudited | 30th June 2008 Unaudited | 31st December 2008 Audited | |
| £000's | £000's | £000's | |
| Assets |
| ||
| Non-current assets |
| ||
| Intangible assets | 3,526 | 3,210 | 3,159 |
| Property plant & equipment | 11,332 | 7,387 | 8,675 |
| ------- | ------- | ------- | |
| Total non-current assets | 14,858 | 10,597 | 11,834 |
| Current assets |
| ||
| Inventories | 1,290 | 1,477 | 1,096 |
| Trade & other receivables | 3,547 | 4,270 | 4,085 |
| Cash and cash equivalents | 1,885 | 1,209 | 2,078 |
| ------- | ------- | ------- | |
| Total current assets | 6,722 | 6,956 | 7,259 |
| ------- | ------- | ------- | |
| Total assets | 21,580 | 17,553 | 19,093 |
| ------- | ------- | ------- | |
| Liabilities | |||
| Current liabilities |
| ||
| Bank overdraft | - | (597) | - |
| Trade & other payables | (2,555) | (2,710) | (2,384) |
| Financial liabilities | (603) | (316) | (1,966) |
| Other financial liabilities | (1,941) | (810) | (988) |
| Tax liabilities | (1,135) | (703) | (1,386) |
| ------- | ------- | ------- | |
|
| (6,234) | (5,136) | (6,724) |
| Non-current liabilities |
| ||
| Financial liabilities | (2,420) | (2,859) | (1,502) |
| Long-term provisions | (347) | (212) | (212) |
| Deferred tax liability | (683) | (604) | (683) |
| ------- | ------- | ------- | |
| (3,450) | (3,675) | (2,397) | |
| ------- | ------- | ------- | |
| Total liabilities | (9,684) | (8,811) | (9,121) |
| ------- | ------- | ------- | |
| Total net assets | 11,896 | 8,742 | 9,972 |
|
| ------- | ------- | ------- |
| Equity attributable to equity holders of the parent |
| ||
| Share capital | 909 | 763 | 763 |
| Share premium account | 6,966 | 5,546 | 5,546 |
| Treasury share reserve | (201) | (59) | (117) |
| Foreign exchange reserve | (22) | (17) | 178 |
| Retained earnings | 4,244 | 2,509 | 3,602 |
| ------- | ------- | ------- | |
| Total equity | 11,896 | 8,742 | 9,972 |
| ------- | ------- | ------- |
Northbridge Industrial Services plc
Consolidated Statement of Cash Flows
For the six months ended 30 June 2009
| 6 Months ended 30thJune 2009 Unaudited | 6 Months ended 30thJune 2008 Unaudited | Year to 31st December 2008 Audited | |
| £000's | £000's | £000's | |
| Operating activities | |||
| Net profit from ordinary activities before taxation | 1,119 | 1,034 | 2,967 |
| Adjustments for: | |||
| Foreign exchange gains | 28 | - | (620) |
| Amortisation of intangible fixed assets | 63 | 58 | 95 |
| Amortisation of capitalised debt fee | 1 | 10 | 92 |
| Depreciation of property plant and equipment | 399 | 374 | 715 |
| (Loss)/profit on disposal of property plant and equipment | 10 | - | (54) |
| Finance income | - | (16) | (23) |
| Finance costs | 78 | 50 | 203 |
| Share option expense | 30 | 25 | 45 |
| ------- | ------- | ------- | |
| 1,728 | 1,535 | 3,420 | |
| (Increase)/decrease in inventories | (187) | (341) | 40 |
| Decrease/(increase) in receivables | 1,022 | (998) | (424) |
| Increase in payables | 90 | 740 | 385 |
| ------- | ------- | ------- | |
| Cash generated from operations | 2,653 | 936 | 3,421 |
| Finance costs | (78) | (50) | (203) |
| Taxation | (565) | (172) | (173) |
| ------- | ------- | ------- | |
| Net cash from operating activities | 2,010 | 714 | 3,045 |
| Cash flows from investing activities | |||
| Finance income | - | 16 | 23 |
| Acquisition of subsidiary undertaking (net of cash acquired) | (1,061) | (1,164) | (1,150) |
| Sale of property, plant and equipment | 45 | 39 | 480 |
| Purchase of property, plant and equipment (Note 4) | (1,947) | (1,592) | (2,925) |
| ------- | ------- | ------- | |
| Net cash used in investing activities | (2,963) | (2,701) | (3,572) |
| Cash flows from financing activities | |||
| Proceeds from share capital issued | 1,459 | - | - |
| Proceeds from bank borrowings | - | 1,750 | 1,626 |
| Repayment of bank borrowings | (41) | (50) | (64) |
| Payment of finance lease obligations | (178) | (50) | (196) |
| Purchase of own shares | (85) | - | (58) |
| Dividends paid to equity shareholders | (194) | (153) | (250) |
| ------- | ------- | ------- | |
| Net cash flow (used in)/from financing activities | 961 | 1,497 | 1,058 |
| Net (decrease)/ increase in cash and cash equivalents | 8 | (490) | 531 |
| Cash and cash equivalents at beginning of period | 2,078 | 1,102 | 1,102 |
| Exchange differences on cash and cash equivalents | (201) | - | 445 |
| Cash and cash equivalents at end of period | 1,885 | 612 | 2,078 |
Notes to the unaudited interim statements
Northbridge Industrial Services plc
1. Basis of preparation
This half-yearly financial report has been prepared in accordance with the accounting policies disclosed in the full statutory accounts for the year ended 31 December 2008.
These policies are in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board as endorsed for use in the European Union, that are expected to be applicable for the year ended 31 December 2009.
The Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing the interim consolidated financial information.
The comparatives for the full year ended 31 December 2008 are not the Group's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.
The interim report for the period ended 30 June 2009 was approved by the board of directors on 29 September 2009.
2. Acquisitions
Tyne Technical Equipment Rental Services
During the period, the Group purchased 66.67% of the interests of TTERS. TTERS is a Dubai registered company whose principal business is the rental of generators and the sale of associated services to the infrastructure and the oil and gas industries in the United Arab Emirates. The total consideration was £170,000, which was satisfied by £62,000 in cash and by the issue of 80,000 new ordinary shares at a price of 135 pence per ordinary share. Additionally, Northbridge will acquire the remaining 33.33% of the shares in the company on 13 April 2011 for a price based on a multiple of net profits in the preceding 12 months, subject to a maximum cost of £680,000 (and a total maximum cost of £850,000). At this level of consideration the profit before taxation of TTERS would be £250,000. Based on an assessment at 30 June 2009, £135,000 has been included as the expected fair value of the contingent consideration. The shares issued to the vendors as consideration are to be held for a minimum period of 24 months.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
| Fair value of assets acquired | £'000 | £'000 |
| Property, plant and equipment | 297 | |
| Current assets | 108 | |
| Contract and customer related intangible assets (recognised on acquisition) | 124 | |
| Other payables | (340) | |
| Deferred tax liability | (35) | |
| 154 | ||
| Consideration paid | ||
|
| ||
| Cash | 62 | |
| Shares | 108 | |
| Fair value of contingent consideration | 135 | |
| Costs of acquisition | 12 | |
| 317 | ||
| Goodwill | 163 |
The net cash sum expended on the acquisition was as follows:
| £'000 | ||||
| Cash paid as consideration | 62 | |||
| Cash paid as acquisition expenses | 12 | |||
| Less cash acquired on acquisition | (1) | |||
| Net cash movement | 73 | |||
The main factors leading to the recognition of goodwill are the presence of certain intangible assets in the acquired entity, such as trading licenses required to operate in Dubai, and the assembled work force of the acquired entity which do not qualify for separate recognition.
It is impractical to determine the IFRS carrying amounts of the assets and liabilities (other than the contracts and customer lists) of TTERS immediately prior to acquisition as the business did not prepare accounts under IFRS.
3. Tax on profit on ordinary activities
The anticipated taxation rate on profits is estimated to be approximately 28%.
4. Property, plant and Equipment
During the period the Group acquired property, plant and equipment with an aggregate cost of £3,186,000 (2008: £2,402,000) of which £1,239,000 (2008: £810,000) was acquired by means of finance leases. Cash payments of £1,947,000 (2008: £1,592,000) were made to purchase property, plant and equipment.
5. Earnings per share
The earnings per share figure has been calculated by dividing the profit after taxation, £806,000, (2008: £748,000) by the weighted average number of shares in issue, 7,527,908 (2008: 7,550,149). 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. At the end of the period, the company had in issue 469,229 (2008: 40,000) share options which have not been included in the calculation of the diluted earnings per share because their effects are anti-dilutive. These share options could be dilutive in the future.
6. Dividends
An interim dividend of 1.4 pence per share (2008: 1.3 pence) will be paid on 13 November 2009 to shareholders on the register as at 16 October 2009. In accordance with IFRS, no provision for the interim dividend has been made in these financial statements
7. 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 this interim announcement will also be available from the Group's website at www.northbridgegroup.co.uk .