23 Sep 2014 07:00
23 September 2014
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Unaudited Interim Results for the six months ended 30 June 2014
Northbridge, the industrial services and rental company today announces its unaudited interim results for the six month period ended 30 June 2014.
Highlights
• Group revenue up 13.8% to £21.2 million (2013: £18.6 million)
• Gross profit up 16.6% to £11.6 million (2013: £9.9 million)
• Operating profit up 27.6% to £3.6 million (2013: £2.8 million)
• Strong cash generation from operations before movements in working capital of £6.5 million (2013: £4.8 million)
· Continuing investment into hire fleet totaling £3.0 million
• Reduction in net gearing to 29.8% (31.5% at 31 December 2013)
• Significant increase in revenue from Middle East and Asia-Pacific businesses
• EPS up 17.5% to 14.8 pence per share (2013: 12.6 pence)
• Interim dividend increased by 10% to 2.2 pence (2013: 2.0 pence)
Acquisition & Placing
· The acquisition of Tasman Oil Tools Ltd and Tasman Oil Tools Leasing Ltd ("Tasman") and placing of 642,202 new Ordinary Shares in Northbridge to raise approximately £3.5 million before expenses, announced separately today
· Tasman, a New Zealand based independent renter of specialist drilling tools suitable for the oil, gas and geothermal industries
· The acquisition reunifies the Tasman brand in Australasia
· Builds on Northbridge's presence in Australasia and complements the existing oil tool rental portfolio
Commenting on the results, acquisition and the outlook, Eric Hook, Chief Executive of Northbridge said:
"We are encouraged by the continued good progress made by Northbridge during the first half of 2014 and with the growth achieved in the key markets of the Middle East and Asia Pacific.
The acquisition of Tasman in New Zealand announced separately today, together with the acquisitions of CAP and OMM last year, and our continuing program of hire fleet investment will enable us to grow our core business further.
Whilst we are mindful that further revenue needs to be secured prior to the year end, we remain optimistic about future trading and are currently on track to achieve management's expectations for the year as a whole."
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 / Clare Akhurst
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 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
I am pleased to report further successful progress in the Group's development during the first half of 2014. Group revenue was up by 14% to £21.2 million (2013: £18.6 million), principally driven by the two acquisitions in the closing months of 2013 of Crestchic Asia Pacific (CAP) and Tasman OMM. Both of these businesses have a strong bias towards rental, and the resulting overall revenue mix for the Group moved further towards hire, reaching 73% during the six month period compared with 64% in 2013.
This change of revenue mix and the higher margins associated with rental enabled us to report an increase in Group profits before tax of 29% to £3.3 million (2013: £2.6 million). The invoiced sales of manufactured units from Burton-on-Trent was lower than last year at £4.6 million (2013: £5.9 million) as a result of delivery timings on a small number of large orders, which will be completed during Q3. Order intake was buoyant and the new containerised production facility, commissioned last year, was fully utilised. We expect the mix of revenue in the second half of 2014 to remain biased towards rental, but at a slightly lower level.
Trading conditions, whilst continuing to improve, still remain challenging, particularly in Europe. The current strength of Sterling has had an impact on the translation of overseas profits and goods for export which are manufactured in the UK and priced in Sterling. In the first half of 2014 approximately 90% of the Group's total revenue was generated outside the United Kingdom (2013: 89%).
Despite these negative influences, the underlying performance of all our major activities improved since the first half of last year, and the two acquisitions in the Middle East and Asia Pacific have integrated well into the Group structure.
Financial results
Northbridge's revenue for the half year ended 30 June 2014 totalled £21.2 million (2013: £18.6 million) with gross profits of £11.6 million (2013: £9.9 million). Profits before tax totalled £3.3 million (2013: £2.6 million). Net assets at 30 June 2014 were £39.2 million (2013: £30.3 million). The composite tax rate for the first half of 2014 was 22.4%, compared with 24.0% in 2013.
Basic earnings per share were 17.5% higher at 14.8 pence (2013: 12.6 pence) and diluted earnings per share were 14.3 pence (2013: 12.2 pence).
Financing and cash flow
During the period the group continued to benefit from an improving cash flow from operating activities before movements in working capital, with £6.5 million (2013: £4.8 million) being generated. A further £3.0 million was invested into the hire fleet (2013: £2.4 million), and the excess cash flow enabled net gearing at the end of the period to further reduce to 29.8% (2013: 36.8%). Year end gearing as at 31 December 2013 was 31.5%.
Earnings before interest, taxation, depreciation and amortization (EBITDA) in the first six months of 2014 was £6.3 million (2013: £4.7 million) an increase of 34%.
Dividends
The Board has declared an interim dividend of 2.2 pence (2013: 2.0 pence), an increase of 10.0%, to be paid on 27 October 2014 to shareholders on the register on 3 October 2014.
Operations
Crestchic Loadbanks
Crestchic, our main UK subsidiary continued to show further growth in rental income. Manufacturing output also increased compared with last year. Some of this output relates to two sizable export orders not due to be invoiced until after the period end.
The new production facility for containerised equipment has been fully utilized since the high capacity crane was installed at the end of 2013. A further mezzanine floor has also been added to the factory during the period and production for 2014 as a whole is likely to be at record levels and justifies recent investment in our UK facilities in Burton on Trent.
Crestchic Asia Pacific (CAP)
On 13 September 2013 the Group acquired Crestchic (Asia Pacific) PTE Limited for a total price of Sing$13.0 million (£6.5 million). Founded in Singapore in 1994, CAP was an independently owned distributor and renter of Crestchic UK's products, with customers in Singapore, Malaysia, China and Indonesia. The hire fleet of loadbanks and transformers were identical to those in Northbridge's own hire fleet. This acquisition unified the well-known Crestchic brand and we have merged CAP with our existing operation of Northbridge Asia Pacific (NAP) which now trades as CAP throughout the region. The acquisition and merger have both been successful and revenue and profits are substantially ahead of last year. Initially we ran the business from two separate premises but have recently been able to relocate to a single larger location.
Northbridge Middle East (NME)
Northbridge Middle East distributes Crestchic products in the Middle East as well as operating its own hire fleet. Since the acquisition of CAP in September 2013, the load testing operation now trades under the Crestchic Middle East (CME) name, but remains part of the portfolio of businesses located in Northbridge's premises in the Jebel Ali free zone of Dubai. The continuation of a number of transformer rental contracts in the first half of 2014 and the start of a new major contract in the region, meant that rental revenue increased by 20% compared with the equivalent period last year. This new contract win is the largest to be undertaken by the Group and involved providing equipment to commission and synchronize a number of gas turbines in a remote oil facility. The contract involved approximately 100MVA of load banks and transformers and the test was conducted at 33,000 Volts and was supported by equipment and personnel from Europe and the Asia Pacific region.
Tasman Oil Tools
Tasman, our oil tools business based in Perth, Western Australia, improved on the record level of rental revenue (up 1.5%) which it had experienced in the comparative period of 2013, when it benefitted from rental contracts overrunning from 2012. The additional equipment acquired for those contracts has enhanced our hire fleet in the region considerably and we expect further revenue opportunities in the future. We have focused further resources in the coal bed methane ("CBM") region of Queensland which has continued to prosper and we believe this will be a good market for Tasman.
In November 2013, the Group added to its portfolio of drilling tools by acquiring the trade and assets of Oilfield Material Management Ltd ("OMM BVI"). OMM BVI is a rental provider of drilling tools originally based in Abu Dhabi, servicing customers in the Middle East and Africa. Following the acquisition, the business relocated to Northbridge's existing premises in the Jebel Ali free zone of Dubai and now trades as Tasman OMM FZE. All the existing staff have relocated with the company. The acquisition and relocation has been successful and the company started the year trading well.
The acquisition of Tasman Oil Tools in New Zealand, announced today, is another exciting development for the Group. Further investment in rental tools is planned for the second half of 2014 and all the Tasman locations are now able to share equipment to maximize revenue opportunities and utilisation.
Outlook
We remain optimistic about the future of the business and with the economy improving in many parts of the world, we believe we can grow our core business further. In addition, in line with our stated strategy, we are still looking for potential acquisition targets and the strength of our cash flow and our balance sheet will help us capitalise on the recovery.
During the last six months we have achieved good growth in our key markets of the Middle East and Asia Pacific in particular. This was aided by judicious investment and the transfer of assets from less buoyant areas. We expect that this process will continue and plan further investment in our worldwide hire fleet.
We announced this morning the acquisition of TOT in New Zealand, which together with the acquisitions of CAP and OMM completed in the second half of 2013, will give us additional size and momentum in our core activities.
We are pleased with the Group's progress during the first half of 2014 with the strong performance providing substantial underpinning of the full year forecast but with further revenue to be secured prior to the year end. We expect continued growth in line with management's expectations.
Peter Harris
Chairman
23 September 2014
Consolidated statement of comprehensive income
For the six months ended 30 June 2014
| Notes | Six months ended 30 June 2014 Unaudited £'000 | Six months ended 30 June 2013 Unaudited £'000 | Year ended 31 December 2013 Audited £'000 |
Revenue |
| 21,171 | 18,611 | 37,594 |
Cost of sales |
| (9,612) | (8,699) | (17,285) |
Gross profit |
| 11,559 | 9,912 | 20,309 |
Operating costs |
|
|
| |
Excluding exceptional items |
| (7,974) | (7,103) | (13,864) |
Exceptional items |
| - | - | 637 |
Total operating costs |
| (7,974) | (7,103) | (13,227) |
Profit from operations |
| 3,585 | 2,809 | 7,082 |
Finance income |
| 17 | 26 | 54 |
Finance costs |
| (293) | (269) | (530) |
Profit before taxation excluding exceptional items |
| 3,309 | 2,566 | 5,969 |
Exceptional items |
| - | - | 637 |
Profit before taxation |
| 3,309 | 2,566 | 6,606 |
Income tax expense |
| (741) | (617) | (1,351) |
Profit for the period attributable to the equity holders of the parent |
| 2,568 | 1,949 | 5,255 |
Other comprehensive income |
|
|
| |
Exchange differences on translating foreign operations |
| (485) | (331) | (2,638) |
Other comprehensive income for the period, net of tax |
| (485) | (331) | (2,638) |
Total comprehensive income for the period attributable to equity holders of the parent |
| 2,083 | 1,618 | 2,617 |
Earnings per share attributable to the equity holders of the parent | 2 |
|
| |
- basic (pence) |
| 14.8 | 12.6 | 32.7 |
- diluted (pence) |
| 14.3 | 12.2 | 31.8 |
Dividend per share (pence) | 3 | 2.20 | 2.00 | 5.90 |
All amounts relate to continuing operations.
Consolidated balance sheet
As at 30 June 2014
| 30 June 2014 Unaudited £'000 | 30 June 2013 Unaudited £'000 | 31 December 2013 Audited £'000 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Intangible assets | 10,280 | 9,671 | 10,656 |
Property, plant and equipment | 34,390 | 28,400 | 34,457 |
| 44,670 | 38,071 | 45,113 |
Current assets |
|
| |
Inventories | 5,841 | 2,596 | 3,847 |
Trade and other receivables | 12,805 | 9,464 | 11,950 |
Cash and cash equivalents | 3,320 | 2,077 | 3,513 |
| 21,966 | 14,137 | 19,310 |
Total assets | 66,636 | 52,208 | 64,423 |
LIABILITIES |
|
| |
Current liabilities |
|
| |
Trade and other payables | 8,442 | 5,319 | 7,474 |
Financial liabilities | 4,592 | 4,699 | 7,873 |
Other financial liabilities | 135 | - | 144 |
Current tax liabilities | 953 | 1,098 | 989 |
| 14,122 | 11,116 | 16,480 |
Non-current liabilities |
|
| |
Financial liabilities | 10,409 | 8,538 | 7,436 |
Other financial liabilities | 269 | - | 364 |
Deferred tax liabilities | 2,607 | 2,266 | 2,750 |
| 13,285 | 10,804 | 10,550 |
Total liabilities | 27,407 | 21,920 | 27,030 |
Total net assets | 39,229 | 30,288 | 37,393 |
Equity attributable to equity holders of the parent |
|
|
|
Share capital | 1,764 | 1,579 | 1,740 |
Shares to be issued | 311 | - | 311 |
Share premium | 19,645 | 13,561 | 19,318 |
Merger reserve | 849 | 849 | 849 |
Treasury share reserve | (201) | (201) | (201) |
Foreign exchange reserve | (2,118) | 674 | (1,633) |
Retained earnings | 18,979 | 13,826 | 17,009 |
Total equity | 39,229 | 30,288 | 37,393 |
Consolidated cash flow statement
For the six months ended 30 June 2014
| Six months ended 30 June 2014 Unaudited £'000 | Six months ended 30 June 2013 Unaudited £'000 | Year ended 31 December 2013 Audited £'000 |
Cash flows from operating activities |
|
|
|
Net profit from ordinary activities before taxation | 3,309 | 2,566 | 6,606 |
Adjustments for: |
| ||
- amortisation of intangible fixed assets | 417 | 328 | 667 |
- amortisation of capitalised debt fee | 27 | 28 | 62 |
- depreciation of property, plant and equipment | 2,594 | 1,785 | 3,894 |
- profit on disposal of property, plant and equipment | (152) | (229) | (737) |
- negative goodwill | - | - | (1,131) |
- non-cash settlement of deferred and contingent consideration | (17) | - | 60 |
- investment income | (17) | (26) | (54) |
- finance costs | 293 | 269 | 530 |
- share option expense | 48 | 48 | 96 |
| 6,502 | 4,769 | 9,993 |
Increase in inventories | (1,896) | (488) | (1,615) |
Increase in receivables | (1,068) | (572) | (1,901) |
Increase in payables | 869 | 1,489 | 2,609 |
Cash generated from operations | 4,407 | 5,198 | 9,086 |
Finance costs | (293) | (269) | (530) |
Taxation | (745) | (700) | (1,204) |
Hire fleet expenditure | (2,311) | (2,403) | (4,830) |
Sale of assets within hire fleet | 505 | 395 | 991 |
Net cash from operating activities | 1,563 | 2,221 | 3,513 |
Cash flows from investing activities |
|
|
|
Finance income | 17 | 26 | 54 |
Acquisition of subsidiary undertaking (net of cash acquired) | - | - | (6,499) |
Payment of deferred consideration | (70) | - | (20) |
Sale of property, plant and equipment | 92 | 85 | 89 |
Purchase of property, plant and equipment | (347) | (97) | (422) |
Net cash used in investing activities | (308) | 14 | (6,798) |
Cash flows from financing activities |
|
| |
Proceeds from share capital issued | 350 | 211 | 6,137 |
Proceeds from bank and other borrowings | 6,562 | 1,132 | 4,018 |
Repayment of bank and other borrowings | (7,048) | (1,312) | (1,533) |
Payment of finance lease creditors | (627) | (609) | (1,405) |
Dividends paid in the year | (676) | (559) | (903) |
Net cash (used in)/from financing activities | (1,439) | (1,137) | 6,314 |
Net decrease in cash and cash equivalents | (184) | 1,098 | 3,029 |
Cash and cash equivalents at beginning of period | 3,513 | 459 | 459 |
Exchange (losses)/gains on cash and cash equivalents | (9) | 51 | 25 |
Cash and cash equivalents at end of period* | 3,320 | 1,608 | 3,513 |
* Cash and cash equivalents as at 30 June 2013 included cash balances of £2,077,000 and an overdraft balance held within current financial liabilities of £469,000.
During the period the Group acquired property, plant and equipment with an aggregate cost of £3,553,000 (2013: 2,615,000) of which £895,000 (2013: 115,000) was acquired by means of finance lease. This includes £2,982,000 (2013: 2,403,000) of hire fleet additions of which £671,000 (2013: nil) was acquired by means of finance lease.
Notes to the unaudited interim statements
For the six months ended 30 June 2014
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 2013.
These policies are in accordance with International Financial Reporting Standards, 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 2014.
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 2014 and the six months ended 30 June 2013 has not been audited, but has been reviewed, pursuant to guidance issued by the Auditing Practices Board.
The financial information for the year ended 31 December 2013 does not constitute the full statutory accounts for that period. The annual report and financial statements for 2013 has been filed with the Registrar of Companies.
The Independent Auditors' Report on the annual report and financial statement for 2013 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The interim report for the period ended 30 June 2014 was approved by the Board of Directors on 23 September 2014.
2. Earnings per share
The earnings per share figure has been calculated by dividing the profit after taxation, £2,568,000 (2013: £1,949,000), by the weighted average number of shares in issue, 17,348,040 (2013: 15,529,252).
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 653,127 (2013: 386,624). At the end of the period, the Company had in issue nil (2013: 193,400) 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.
3. Dividends
An interim dividend of 2.20 pence per share (2013: 2.00 pence) will be paid on 27 October 2014 to shareholders on the register as at 3 October 2014. In accordance with IFRS, no provision for the interim dividend has been made in these financial statements.
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.