1 Aug 2016 07:00
1 August 2016
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Pre-Close Trading Update
Northbridge, the industrial services and rental company, is pleased to issue the following pre-close trading update in advance of its interim results for the six months ended 30 June 2016, which are scheduled to be released on 29 September 2016.
The following statement updates the previous trading statement given at our AGM on 26 May.
Despite a recovery in the crude oil price since its lowest point in February, market conditions for the majority of global participants in the oil and gas industry during Q2 2016 worsened slightly and investment in current projects continued to fall. This had a detrimental effect on our businesses which are involved directly in this market. Our load testing business in the Middle East and Asia Pac regions also experienced challenging conditions which affected both rentals and sales in particular due to lower activity in core markets such as shipyards. In this context, it now seems prudent not to assume any upturn in the Group's performance for the second half of 2016.
Looking forward into 2017 and 2018 there have been some more reassuring announcements from the oil service majors who form part of our customer base. They rely more on the activity levels in the oil fields rather than the oil price and they believe the worst is over and are predicting a return to more positive levels of business in the future. If this is the case, we remain well positioned to benefit from the market upturn as and when it arrives. It the meantime we continue to reduce costs and maximise cash generation while competing aggressively for every opportunity.
On a more positive note our other activities, primarily focused on power reliability, have performed much better and remain a defensive hedge against the more volatile resource markets. Our load bank rentals in the UK and Europe continue to perform well and, as a result of ongoing R&D and product innovation, some new markets are beginning to appear on the horizon. Our new Service Division has outperformed our expectations and revenue in China has continued to grow. Transformer rentals, frequently used on power projects, have benefited from lower fuel costs and have remained on hire for longer. All these activities continue to generate strong positive cash flows.
Our new rental operation in the US has traded very well since it started operations in the last quarter of 2015, with our new multi-voltage units, unique in the market, having had a very positive reception. We plan some further modest investment later this year to sustain the momentum we have created in this market.
The dramatic fall of the GBP£ following the BREXIT vote at the end June will have a positive and material impact on our balance sheet at 30 June with more than 90% of our net assets held in currencies other than the GBP£. However all our current trading losses are also outside the UK and the translation of these will impact results until the market recovers.
Our successful placing and open offer in April, which raised £5.6 million, further strengthened the balance sheet and our current trading generates sufficient cash flows to continue to pay down existing debt quickly. The fund raising and the fall in the GBP£ will make a very material reduction to our balance sheet gearing. This helps secure our medium term future and we can continue to "ride out" the current turbulence in the market with confidence and also allows us to invest judiciously for the future.
For further information
Northbridge Industrial Services plc 01283 531645
Eric Hook
Iwan Phillips
StockdaleSecurities 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.