18 Apr 2016 07:00
18 April 2016
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
Preliminary Results for the Year Ended 31 December 2015
Northbridge Industrial Services plc, the industrial services and rental company, today announces its preliminary results for the year ended 31 December 2015.
Key points:
· Group revenue 24.0% lower at £34.1 million (2014: £44.9 million)
· Loss before tax of £8.6 million (2014: profit of £6.3 million) including exceptional costs of £7.2 million (2014: £0.7 million)
· Pre-exceptional EBITDA of £6.0 million (2014: £13.8 million)
· Basic loss per share of 44.3 pence (2014: earnings per share of 28.8 pence)
· Net debt reduced to £14.3 million (2014: £14.7 million; 30 June 2015: £16.2 million)
· Closure of non-core activities which raised around £1.5 million cash
· Reduction of operating expenses actioned in 2015 with full benefit to be seen in 2016
· Fund raising by Placing and Open Offer announced separately today
Eric Hook, Chief Executive Officer, commenting on the results and outlook said:
"As previously announced the dramatic fall in the price of oil during 2015 was the single biggest event to impact Northbridge's trading performance. 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.
However, other parts of our business, most notably the rental activities in Europe, which are less dependent on the oil sector performed well, continuing to generate cash. Additionally, funds raised through the proposed Placing and Open offer and the refocused Company will place Northbridge in a position of strength in light of any market recovery.
We have taken the opportunity during 2015 to accelerate the rationalisation of our structure and product offering and have exited non-core businesses and disposed of under utilised assets. We have also streamlined the core businesses to reflect the much lower revenue expected in the near-term. The annualised effect of the cost savings made to date are substantial and, whilst this does not make up for the decline in rental revenue, it will protect our cash flow and put us in a much stronger position when the trading environment improves.
Our debt naturally amortises quickly over the next two years whilst the market stabilises. This will then enable us to resume investing in our business using our own cash flow as demand begins to increase."
Outlook:
The price of crude oil continued to fall from the start of 2016 and reached a nine year low in January. This led to further cut backs in investment from the oil majors and oil services companies. We in turn have instigated further cost savings in order to reduce the impact on Northbridge.
Despite a small rebound during March, the oil price is unlikely to recover materially until supply and demand are back in balance. The market's overwhelming assumption now is that a recovery is unlikely to happen before 2017.
In preparation for a further year of low rental volumes and the consequential effect on our cash flow and profits, the Board has decided not to propose a final dividend for 2015 and will raise further equity via a Placing and Open Offer also announced this morning. The funds raised will be used to strengthen the business going forward, make the deferred consideration payment for Tasman New Zealand when due and support hire fleet development as the need arises. It will have the additional benefit of making bank covenant compliance easier over future periods.
Both the core businesses of Crestchic and Tasman have good sustainable growth opportunities in the future when their markets recover to more normal dynamics. Over the last 12 months we have made very substantial cost savings in our operational overheads but these have been done without compromising our ability to benefit from a future up turn.
This has been the most difficult period in our 10 years of trading and we would like to thank all our staff, both past and present, for their contribution and support.
For further information
Northbridge Industrial Services plc 01283 531645
Eric Hook, Chief Executive Officer
Stockdale 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. With offices or agents in the UK, USA, Dubai, Belgium, Germany, France, Australia, New Zealand, Singapore, China, Brazil and South Korea, Northbridge has a global customer base. This includes utility companies, the oil and gas sector, shipping, banking, mining, 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 grown by providing a high level of service, responsiveness and flexibility to customers. It has grown by the acquisition of companies in the UK, Dubai, Australia, Belgium, New Zealand 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 AND CHIEF EXECUTIVE'S REVIEW
We are pleased to present our review of the Group's trading performance for 2015.
BUSINESS REVIEW
The main background for the Group during 2015 has been the collapse in the crude oil price and its impact on the Group's revenues. From the end of June 2014 up to the 31 December 2015, the price of Brent crude fell from $113.30 per barrel to $37.28 per barrel and since the year end reached a low point of $28.94 per barrel in January 2016. This was mirrored by a reduction of investment by the oil and gas majors, which particularly impacted drilling activities for both exploration and production. In addition it also had a disruptive effect on marine engineering relating to the oil industry and a materially adverse effect on our business.
Outside of Western Europe, much of our business is conducted with customers involved in some way with the oil, gas and extractive industries, usually marine or other power intensive industries, as well as oil tools. Northbridge is fortunate to have other activities mostly operating from Western Europe which have been less impacted by the malaise of the oil industry, as they are more focussed towards power reliability and utilities. Some of these activities have been counter cyclical and have benefitted from the much lower fuel price, with numerous contracts having been extended as well as winning new ones.
We took the opportunity during the year to accelerate the rationalisation and streamlining of the Group to focus exclusively on electrical equipment, principally loadbanks and transformers, as well as oil tools. This strategy, which was implemented during 2014, has now been completed. We now operate through two main divisions, Crestchic loadbanks and transformers (Crestchic) and Tasman Oil Tools (Tasman).
As a result we have now exited all our non-core activities, closed down non performing locations and sold all surplus assets. We have also significantly reduced our overhead costs and our overall head count has been reduced by 40, approximately 15% of the total. Capital investment, which is normally subject to long lead times, has been considerably slowed and no further acquisitions were pursued.
There have obviously been costs associated with this process, particularly due to its accelerated nature and these are shown as exceptional costs in the consolidated statement of comprehensive income. Inevitably, with uncertainty as to when a recovery begins and to its strength, the Board has reviewed the carrying value of the investments in subsidiaries and decided that an impairment of £4.9 million to the intangibles, relating to the oil and gas industries, is appropriate. This has mostly affected our operations in Australia and New Zealand.
The impact of these factors on the Group as a whole has resulted in total revenue reducing by 24.0% to £34.1 million (2014:£44.9 million). Included in this figure, Tasman's revenue was £10.5 million (2014: £14.7 million), a decline of 28.4%, Crestchic's revenue was £22.8 million (2014: £28.6 million), a decline of 20.4%. The decline in volumes for both businesses was primarily due to the down turn in oil and gas activity which also had an adverse impact on the revenue mix away from higher margin rental (55.6%) and towards sales (44.4%) (2014: 60.9%:39.1% rental to sales mix). Total rental revenue for the group was £19.0 million, down 30.5% (2014: £27.3 million) despite a full year's contribution from Tasman in New Zealand.
Overall gross margins of 43.4% were down (2014: 48.4%), the improvement in manufacturing margins being offset by the decline in rental margins, which were due to lower utilisation. Operating expenses at £15.5 million (2014: £14.2 million) were higher due to a full year's costs from Tasman New Zealand acquired in September 2014 as well as the Crestchic start up in China and the USA.
Pre-exceptional losses for the year were £1.4 million (2014: £7.0 million profit). Exceptional costs relating to the rationalisation and restructuring programme described above amounted to £7.2 million (2014: £0.7) including an impairment charge to intangible assets of £ 4.9 million (£4.7 million on on-going business and £0.2m relating to entities that have ceased to trade). Pre-exceptional EBITDA was £6.0 million down 56.8% (2014: £13.8 million) with some of this decline relating to non-core rental businesses exited during the year.
Crestchic Loadbanks and Northbridge Transformers (Crestchic)
Crestchic was also impacted by the oil and gas slowdown, with overall turnover 20.4% lower at £22.8 million (2014: £28.6 million). However, rental from the European depots, which is more directed towards power reliability and utilities, performed at a record level; despite weakness in the Euro, revenue from this division was up 6.8% to £7.7 million (2014: £7.2 million). Revenue from Crestchic's Middle and Far Eastern locations was down 58.2% to £4.4 million (2014: £10.5 million), of which almost all was oil related. Sales of manufactured units were £10.3 million (2014: £13.4 million).
Overall gross margins were 38.9% compared with 2014 at 39.5%. This was due to a reduction in utilisation affecting the rental margin, compensated for by an increase in the manufacturing margin to 28.0% from 24.3% in 2014, when the sales mix included some packaged transformers following a single large order gained during that year.
Crestchic designs, manufactures, sells and hires loadbank equipment, which is primarily used for the commissioning and maintenance of independent power sources such as diesel generators and gas turbines. The need to test and maintain standby and independent power systems, together with the associated switchgear and controls, has become an increasingly important element within the power critical technology used by the banking, medical, marine and defence industries. This has resulted in continued strong demand for Crestchic's range of equipment and services throughout the world. Additionally, Crestchic continues to benefit from a background of an increasingly unreliable global power infrastructure and an increase in the size and remoteness of certain projects. All our loadbank activities are now branded as "Crestchic" and we are able to promote that service in an integrated way throughout the world.
Northbridge Transformers ("NT"), which offers specialist transformers for rental throughout the world, continued to perform well during 2015. With European demand improving, it is also able to use Crestchic's depots in the Middle East and in Singapore as a conduit for its activities. It won a significant contract in the last quarter of 2015 to provide step down transformers for the COP 21 climate change conference in Paris. Using the transformers in this way enabled organisers to avoid using the less environmentally friendly diesel generators.
Working alongside CME and CAP, NT also provides packaged transformers for large independent power projects ("IPP"), where diesel generators are used to supplement national grids at high voltages in times of power shortage. Substantial investment in this activity over the last few years means we have been able to grow this business from its original base in Belgium to a worldwide audience, leveraging off our other depots throughout the world.
Tasman Oil Tools (Tasman)
Tasman now operates from a single corporate structure, with depots in Australia, Dubai and New Zealand offering a full range of downhole oil tools to the oil, gas and geothermal industries throughout the Middle East, Far East and Australasia. This is predominately a rental business and revenue has suffered as a result of the down turn in drilling activities in the regions it serves. Total turnover was £10.5 million, down from £14.7 million in 2014. This was despite benefitting from a full year's revenue from the New Zealand business acquired in September 2014.
Gross margin fell to 44.1% from 54.2% in 2014, due to lower utilisation of equipment. In addition, lower rental volumes lead to lower service charges to the customer, which also impact both turnover and gross profits. Pre-exceptional losses were £ (0.7) million compared to a profit in 2014 of £3.7 million. Exceptional costs amounted to £1.0 million, mostly related to redundancy and reorganisation costs.
FINANCIAL REVIEW
Revenue and profit before tax
The Group's revenues are derived principally from the rental of its hire fleet and also from the sale of manufactured and new equipment and the split of these revenues between the various reportable segments and activities compared to 2014 is shown in note 2.
As many of the Group's costs are largely of a fixed nature in the short to medium term (with significant movements in the cost base being attributable to acquisitions and divestments) any revenue movement, however small, will be highlighted at the gross profit level. This impact is often referred to as operational gearing. Gross profit for the year decreased to £14.8 million from £21.7 million, following the reduction of overall revenue. There was also an adverse shift in sales mix away from the higher margin rental revenue.
Net finance costs for the year rose slightly to £0.7 million (2014: £0.5 million), due to an increase in the level of average net debt across the period following the acquisition of Tasman New Zealand in the second half of 2014.
The Group incurred exceptional items during the year totalling £7.2 million (2014: £0.7 million). This was due to the costs of exiting non-core businesses, sale of surplus assets, impairment of intangible assets and the cost reduction exercise.
After amortisation charges, losses before tax (pre-exceptional) totalled £1.4 million (profit 2014: £7.0 million), Total losses before tax totalled £8.6 million (2014: profit of £6.3 million).
Earnings per share
The basic LPS of 44.3 pence (2014: EPS of 28.8 pence) and diluted LPS of 44.3 pence (2014: EPS of 28.0 pence) have been arrived at in accordance with the calculations contained in note 10.
Balance sheet and debt
Total net assets have decreased by £10.5 million during the year to £35.9 million primarily due to a pre-exceptional loss of £1.4 million, a negative movement on the foreign exchange reserve of £1.1 million and exceptional costs of £7.2 million (including a total impairment charge of £4.9 million). Net assets per share at the year end are 192 pence (2014: 263 pence).
The reorganisation programme led to hire fleet assets with a cost value of £5.6 million being disposed of. Hire fleet additions of £5.4 million (2014: £8.3 million) were concentrated in the first half of the year.
Trade receivables have reduced to £8.1 million (2014: £11.2 million) impacted by the decrease in revenue during the year. Debtor days have decreased from 91 days to 87 days during the year.
Cash and cash equivalents increased marginally to £3.9 million (2014: £3.5 million) with the opportunity for good cash generation remaining in the current financial year.
Notwithstanding the trading losses seen during the year, the asset sales and cost reductions have led to net debt decreasing to £14.3 million (2014: £14.7 million). Net gearing, calculated as net debt divided by total equity, increased from 31.6% to 39.8% due to net asset reduction described previously. A reduction in net debt and gearing is targeted for 2016.
Cash flow
The Group continues to generate cash and cash from operating activities totalled £6.9 million (2014: £8.6 million) during the year. £4.1 million was used to purchase new hire fleet equipment (mainly in the first half of the year) and £2.5 million was generated from the sale of surplus assets.
The Group closely monitors cash management and prioritises the repatriation of cash to the UK from its overseas subsidiaries.
During the year the Group changed its main UK bank and the cash flow includes the repayment of the previous facilities and the drawdown of the new facilities. Cash outflow from financing activities totalled £3.6 million (2014: inflow of £4.2 million).
In December The Group agreed revised covenants with its banks and the first testing took place on 31 March 2016 and were passed.
The Group paid out £0.9 million (2014: £1.1 million) in dividends to shareholders and £0.9m (2014: £2.3 million) of deferred consideration.
Income tax expense
The overall income tax credit for the year totalled £0.4 million (2014: charge of £1.2 million). The Group manages taxes such that it pays the correct amount of tax in each country that it operates, utilising available reliefs and engaging with local tax authorities and advisors as appropriate.
STRATEGY
The Northbridge strategy is to consolidate and build its specialist industrial equipment businesses by:
· Driving growth organically through investing in the hire fleet, improving quality systems and customer service
· Using partnerships to increase geographical exposure
When considering further acquisitions, the main criteria will be:
· Involvement in specialist electrical services or in drilling tools
· Active in the oil and gas or power related industry
· Capable of supplying a worldwide customer base
In achieving this strategy we will be able to capitalise on the market opportunity to become a significant industrial services business serving an international market. The Board reviews this strategy periodically and believes it is still the correct one for the Group.
OUTLOOK
The price of crude oil continued to fall from the start of 2016 and reached a nine year low in January. This led to further cut backs in investment from the oil majors and oil services companies. We in turn have instigated further cost savings in order to reduce the impact on Northbridge.
Despite a small rebound during March, the oil price is unlikely to recover materially until supply and demand are back in balance. The market's overwhelming assumption now is that a recovery is unlikely to happen before 2017.
In preparation for a further year of low rental volumes and the consequential effect on our cash flow and profits, the Board has decided not to propose a final dividend for 2015 and will raise further equity via a Placing and Open Offer also announced this morning. The funds raised will be used to strengthen the business going forward, make the deferred consideration payment for Tasman New Zealand when due and support hire fleet development as the need arises. It will have the additional benefit of making bank covenant compliance easier over future periods.
Both the core businesses of Crestchic and Tasman have good sustainable growth opportunities in the future when their markets recover to more normal dynamics. Over the last 12 months we have made very substantial cost savings in our operational overheads but these have been done without compromising our ability to benefit from a future up turn.
This has been the most difficult period in our 10 years of trading and we would like to thank all our staff, both past and present, for their contribution and support.
Peter Harris Eric Hook
Chairman Chief Executive
18 April 2016 18 April 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
|
| 2015 | 2014 |
| Note | £'000 | £'000 |
Revenue | 2 | 34,090 | 44,871 |
Cost of sales |
| (19,286) | (23,150) |
Gross profit |
| 14,804 | 21,721 |
Operating costs |
|
|
|
Excluding exceptional items |
| (15,549) | (14,229) |
Exceptional items | 3 | (7,189) | (655) |
Total operating costs |
| (22,378) | (14,884) |
(Loss)/profits from operations |
| (7,934) | 6,837 |
Finance income |
| 8 | 33 |
Finance costs |
| (655) | (570) |
(Loss)/profits before income tax excluding exceptional items |
| (1,392) | 6,955 |
Exceptional items | 3 | (7,189) | (655) |
(Loss)/profits before income tax |
| (8,581) | 6,300 |
Income tax expense | 4 | 430 | (1,228) |
(Loss)/profits for the year attributable to the equity holders of the parent |
| (8,151) | 5,072 |
Other comprehensive income |
|
|
|
Exchange differences on translating foreign operations |
| (1,156) | 472 |
Other comprehensive income for the year, net of tax |
| (1,156) | 472 |
Total comprehensive income for the year attributable to equity holders of the parent |
| (9,307) | 5,544 |
(Loss)/Earnings per share |
|
|
|
- basic (pence) | 5 | (44.3) | 28.8 |
- diluted (pence) | 5 | (44.3) | 28.0 |
All amounts relate to continuing operations.
CONSOLIDATED BALANCE SHEET
As at 31 December 2015
|
| 2015 |
| 2014 | ||
|
| £'000 | £'000 |
| £'000 | £'000 |
ASSETS |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
| 12,797 |
|
| 19,618 |
|
Property, plant and equipment |
| 35,556 |
|
| 39,113 |
|
Deferred tax asset |
| 316 |
|
| - |
|
|
|
| 48,669 |
|
| 58,731 |
Current assets |
|
|
|
|
|
|
Inventories |
| 4,440 |
|
| 4,249 |
|
Trade and other receivables |
| 9,933 |
|
| 12,858 |
|
Cash and cash equivalents |
| 3,852 |
|
| 4,391 |
|
|
|
| 18,225 |
|
| 21,498 |
Total assets |
|
| 66,894 |
|
| 80,229 |
LIABILITIES |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
| 6,950 |
|
| 6,510 |
|
Financial liabilities |
| 6,044 |
|
| 5,690 |
|
Other financial liabilities |
| 1,160 |
|
| 1,021 |
|
Current tax liabilities |
| 538 |
|
| 887 |
|
|
|
| 14,692 |
|
| 14,108 |
Non-current liabilities |
|
|
|
|
|
|
Financial liabilities |
| 12,090 |
|
| 13,372 |
|
Other financial liabilities |
| 928 |
|
| 2,244 |
|
Deferred tax liabilities |
| 3,303 |
|
| 4,082 |
|
|
|
| 16,321 |
|
| 19,698 |
Total liabilities |
|
| 31,013 |
|
| 33,806 |
Total net assets |
|
| 35,881 |
|
| 46,423 |
Capital and reserves attributable to equity holders of the Company |
|
|
|
|
|
|
Share capital |
|
| 1,864 |
|
| 1,859 |
Share premium |
|
| 23,266 |
|
| 23,188 |
Merger reserve |
|
| 2,810 |
|
| 2,810 |
Foreign exchange reserve |
|
| (2,317) |
|
| (1,161) |
Treasury share reserve |
|
| (451) |
|
| (201) |
Retained earnings |
|
| 10,709 |
|
| 19,928 |
Total equity |
|
| 35,881 |
|
| 46,423 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
|
| Shares |
|
| Foreign | Treasury |
|
|
| Share | to be | Share | Merger | exchange | share | Retained |
|
| capital | issued | premium | reserve | reserve | reserve | earnings | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Changes in equity |
|
|
|
|
|
|
|
|
Balance at 1 January 2015 | 1,859 | - | 23,188 | 2,810 | (1,161) | (201) | 19,928 | 46,423 |
Loss for the year | - | - | - | - | - | - | (8,151) | (8,151) |
Other comprehensive income | - | - | - | - | (1,156) | - | - | (1,156) |
Total comprehensive income for the year | - | - | - | - | (1,156) | - | (8,151) | (9,307) |
Issue of share capital | 5 | - | 78 | - | - | - | - | 83 |
Purchase of own shares | - | - | - | - | - | (250) | - | (250) |
Deferred tax on share options | - | - | - | - | - | - | (245) | (245) |
Share option expense | - | - | - | - | - | - | 96 | 96 |
Dividends paid | - | - | - | - | - | - | (919) | (919) |
Balance at 31 December 2015 | 1,864 | - | 23,266 | 2,810 | (2,317) | (451) | 10,709 | 35,881 |
For the year ended 31 December 2014
|
| Shares |
|
| Foreign | Treasury |
|
|
| Share | to be | Share | Merger | exchange | share | Retained |
|
| capital | issued | premium | reserve | reserve | reserve | earnings | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Changes in equity |
|
|
|
|
|
|
|
|
Balance at 1 January 2014 | 1,740 | 311 | 19,318 | 849 | (1,633) | (201) | 17,009 | 37,393 |
Profit for the year | - | - | - | - | - | - | 5,072 | 5,072 |
Other comprehensive income | - | - | - | - | 472 | - | - | 472 |
Total comprehensive income for the year | - | - | - | - | 472 | - | 5,072 | 5,544 |
Issue of share capital | 119 | (311) | 4,102 | 1,961 | - | - | - | 5,871 |
Share issue costs | - | - | (232) | - | - | - | - | (232) |
Deferred tax on share options | - | - | - | - | - | - | (200) | (200) |
Purchase of non-controlling interest | - | - | - | - | - | - | (968) | (968) |
Share option expense | - | - | - | - | - | - | 96 | 96 |
Dividends paid | - | - | - | - | - | - | (1,081) | (1,081) |
Balance at 31 December 2014 | 1,859 | - | 23,188 | 2,810 | (1,161) | (201) | 19,928 | 46,423 |
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2015
|
| 2015 | 2014 |
|
| £'000 | £'000 |
Cash flows from operating activities |
|
|
|
Net (loss)/profit from ordinary activities before taxation |
| (8,581) | 6,300 |
Adjustments for: |
|
|
|
- amortisation and impairment of intangible assets |
| 5,733 | 895 |
- amortisation of capitalised debt fee |
| 208 | 55 |
- depreciation of property, plant and equipment |
| 5,881 | 5,451 |
- profit on disposal of property, plant and equipment |
| (458) | (423) |
- non-cash movement in deferred consideration |
| (3) | (190) |
- investment income |
| (8) | (33) |
- finance costs |
| 570 | 570 |
- share option expense |
| 96 | 96 |
|
| 3,523 | 12,721 |
Increase in inventories |
| 348 | (215) |
Decrease/(increase) in receivables |
| 2,796 | 1,096 |
(Decrease)/increase in payables |
| 306 | (5,016) |
Cash generated from operations |
| 6,939 | 8,586 |
Finance costs |
| (655) | (570) |
Taxation |
| (942) | (1,180) |
Hire fleet expenditure |
| (4,080) | (5,966) |
Sale of assets within hire fleet |
| 2,493 | 2,154 |
Net cash from operating activities |
| 3,755 | 3,024 |
Cash flows from investing activities |
|
|
|
Finance income |
| 8 | 33 |
Acquisition of subsidiary undertaking (net of cash acquired) |
| - | (4,126) |
Payment of deferred consideration |
| (941) | (2,306) |
Purchase of property, plant and equipment |
| (494) | (1,052) |
Sale of property, plant and equipment |
| 109 | 112 |
Net cash used in investing activities |
| (1,320) | (7,339) |
Cash flows from financing activities |
|
|
|
Proceeds from share capital issued |
| 83 | 3,721 |
Proceeds from bank and other borrowings |
| 12,957 | 4,721 |
Purchase of own shares |
| (250) | - |
Repayment of bank borrowings |
| (13,957) | (1,962) |
Repayment of finance lease creditors |
| (1,555) | (1,166) |
Dividends paid in the year |
| (919) | (1,081) |
Net (used in)/from financing activities |
| (3,641) | 4,233 |
Net (decrease)/increase in cash and cash equivalents |
| (1,206) | (82) |
Cash and cash equivalents at beginning of period |
| 3,427 | 3,513 |
Exchange losses on cash and cash equivalents |
| (46) | (4) |
Cash and cash equivalents at end of period |
| 2,175 | 3,427 |
During the period the Group acquired property, plant and hire equipment with an aggregate cost of £5,365,000 (2014: £8,324,000) of which £791,000 (2014: £1,306,000) was acquired by means of finance leases. This includes £4,791,000 (2014: £7,029,000) of hire fleet additions of which £711,000 (2014: £1,063,000) was acquired by means of finance lease.
Cash and cash equivalents includes cash and cash equivalents as disclosed in current assets on the balance sheet and overdraft balances of £1,677,000 (2014: £964,000) held with financial liabilities.
1. ACCOUNTING POLICIES
1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
While the financial information included in the annual financial results announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed for use in the European Union (IFRSs), this announcement does not contain sufficient information to comply with IFRSs.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2015 or 2014, but is derived from those accounts. Statutory accounts for the year ended 31 December 2014 have been delivered to the Registrar of Companies and those for the year ended 31 December 2015 will be delivered following the company's annual general meeting.
The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports.
Their report for the year end 31 December 2015 and 31 December 2014 did not contain statements under s498 (2) or (3) of the Companies Act 2006.
1.2 BASIS OF CONSOLIDATION
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:
- The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights substantive potential voting rights held by the company and by other parties.
- Other contractual arrangements
- Historic patterns in voting attendance
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
2. SEGMENT INFORMATION
The Group currently has two main reportable segments:
· Crestchic loadbanks and transformers - this segment is involved in the manufacture, hire and sale of loadbanks and transformers. It is the largest proportion of the Group's business and generated 67% (2014: 64%) of the Group's revenue. This includes Crestchic, NT, Crestchic France, NME, CME, CAP, NAP and China businesses;
· Tasman oil tools and loadcells - this segment is involved in the hire and sale of oil tools and loadcells and contributes 31% (2014: 33%) of the Group's revenue. This includes the TOTAU, TOTNZ, TOTAE and NLS businesses.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer different products and services.
Measurement of operating segment profit or loss, assets and liabilities
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
The Group evaluates performance on the basis of profit or loss before tax.
Segment assets and liabilities include an aggregation of all assets and liabilities relating to businesses included within each segment. Other adjustments relate to the non-reportable head office along with consolidation adjustments which include goodwill and intangible assets. All inter-segment transactions are at arm's length.
| Crestchic loadbanks and transformers £'000 | Tasman oil tools and loadcells £'000 | Total £'000 | Other trading entities £'000 | Other including consolidation adjustments £'000 | 2015 Total £'000 |
Revenue from external customers | 22,750 | 10,534 | 33,284 | 806 | - | 34,090 |
Finance income | - | 6 | 6 | - | 2 | 8 |
Finance expense | (194) | (32) | (226) | (8) | (421) | (655) |
Depreciation | (3,508) | (1,912) | (5,420) | (76) | (385) | (5,881) |
Amortisation and impairment | (154) | (81) | (235) | - | (5,263) | (5,733) |
Profit/(loss) before tax before exceptional items | 2,075 | (702) | 1,373 | (157) | (2,608) | (1,392) |
Exceptional items | (360) | (986) | (1,346) | (850) | (4,993) | (7,189) |
Profit/(loss) before tax | 1,715 | (1,688) | 27 | (1,007) | (7,601) | (8,581) |
Balance sheet |
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Assets | 55,223 | 20,781 | 76,004 | 4,333 | (13,443) | 66,894 |
Liabilities | (24,983) | (12,357) | (37,340) | (4,108) | 10,435 | (31,013) |
| 30,240 | 8,424 | 38,664 | 225 | (3,008) | 35,881 |
Non-current asset additions |
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Property, plant and equipment additions | 1,600 | 3,675 | 5,275 | 90 | - | 5,365 |
Intangible asset additions | - | - | - | - | - | - |
The reconciling adjustments between the total segmental loss before tax and the loss before tax of the Group include a trading loss from other trading entities (£157,000), amortisation (£1,255,000), exceptional costs (£5,843,000) and head office expenditure (£1,188,000). The reconciling adjustments between the total segmental net assets and the net assets of the Group include the head office net assets, other trading entity net assets and consolidation adjustments.
| Crestchic loadbanks and transformers £'000 | Tasman oil tools and loadcells £'000 | Total £'000 | Other trading entities £'000 | Other including consolidation adjustments £'000 | 2014 Total £'000 |
Revenue from external customers | 28,578 | 14,707 | 43,285 | 1,586 | - | 44,871 |
Finance income | 12 | 21 | 33 | - | - | 33 |
Finance expense | (232) | (32) | (264) | (8) | (298) | (570) |
Depreciation | (3,453) | (1,581) | (5,034) | (311) | (106) | (5,451) |
Amortisation and impairment | (29) | (207) | (236) | - | (659) | (895) |
Profit/(loss) before tax before exceptional items | 5,542 | 3,658 | 9,200 | (209) | (2,036) | 6,955 |
Exceptional items | - | (99) | (99) | (71) | (485) | (655) |
Profit/(loss) before tax | 5,542 | 3,559 | 9,101 | (280) | (2,521) | 6,300 |
Balance sheet |
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Assets | 56,566 | 22,560 | 79,126 | 5,365 | (5,226) | 79,265 |
Liabilities | (28,515) | (6,919) | (35,434) | (4,554) | 7,146 | (32,842) |
| 28,051 | 15,641 | 43,692 | 811 | 1,920 | 46,423 |
Non-current asset additions |
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Property, plant and equipment additions | 4,022 | 3,767 | 7,789 | 531 | 4 | 8,324 |
Intangible asset additions | - | - | - | - | 9,905 | 9,505 |
The reconciling adjustments between the total segmental profit before tax and the profit before tax of the Group include a pre-exceptional trading loss from other trading entities of (£209,000), amortisation (£659,000), exceptional costs (£556,000) and head office expenditure (£1,156,000). The reconciling adjustments between the total segmental net assets and the net assets of the Group include the head office net assets, other trading entity net assets and consolidation adjustments.
| External revenue by location of sale origination |
| Non-current assets by location | ||
| 2015 £'000 | 2014 £'000 |
| 2015 £'000 | 2014 £'000 |
UK | 15,341 | 17,951 |
| 11,502 | 14,879 |
Australia | 4,427 | 8,902 |
| 5,485 | 8,652 |
United Arab Emirates | 4,726 | 7,763 |
| 11,319 | 11,112 |
Azerbaijan | 715 | 1,057 |
| - | 564 |
Singapore | 4,831 | 6,491 |
| 5,985 | 7,808 |
New Zealand | 2,186 | 1,409 |
| 8,833 | 11,939 |
Belgium | 1,221 | 794 |
| 4,263 | 3,767 |
China | 110 | - |
| 959 | - |
Other | 533 | 504 |
| 7 | 10 |
| 34,090 | 44,871 |
| 48,353 | 58,731 |
| External revenue by type |
| External revenue by type | ||
| 2015 £'000 | 2014 £'000 |
| 2015 % | 2014 % |
Hire of equipment | 18,970 | 27,308 |
| 55.6 | 60.9 |
Sale of product | 15,120 | 17,563 |
| 44.4 | 39.1 |
| 34,090 | 44,871 |
| 100.0 | 100.0 |
3. EXCEPTIONAL COSTS
Exceptional costs incurred during the year were as follows:
| 2015 | 2014 |
| £'000 | £'000 |
Acquisition costs(1) | 227 | 454 |
Reorganisation costs(2) | 1,266 | 102 |
Redundancy costs(3) | 768 | - |
Impairment of intangible assets(4) | 4,729 | 99 |
Banking costs(5) | 199 | - |
Exceptional costs | 7,189 | 655 |
(1) The exceptional costs relate to aborted acquisition costs and costs relating to the acquisition of Tasman Oil Tools Limited and Tasman Oil Tools Leasing Limited in 2014 (2014: the acquisition of Tasman Oil Tools Limited and Tasman Oil Tools Leasing Limited).
(2) During the year the Group has conducted a reorganisation of activities and these costs have been disclosed as exceptional. The Group has sold the assets of its compressor hire business in the UK and its generator hire businesses in Dubai and Azerbaijan as well as closing the Vietnamese branch of its Singapore based Loadcell business. (2014: Relocation costs relating to Crestchic (Asia-Pacific) Pte Limited Oilfield Material Management Limited and a loss on disposal of non-core assets).
(3) During the year the Group has suffered redundancy costs relating to on-going subsidiaries that are deemed to be exceptional.
(4) As part of the ongoing review of the Group's Non-current assets, the Board has recognised that the recoverable amount relating to certain Intangible assets are less than their carrying value. A full impairment totalling £483,000 has been made against Goodwill and Customer Relationships recognised on the acquisition of Loadcell in 2011, a full impairment of £2,642,000 has been made against goodwill recognised on the acquisition of Tasman Australia in 2010 and an impairment of £1,604,000 has been made against the goodwill recognised on the acquisition of Tasman New Zealand in 2014 (2014: impairment of goodwill recognised on the acquisition of Loadcell in 2011). The total impairment charge included in note 11 of £4,894,000 also includes £165,000 of impairment of intangible assets relating to entities that no longer trade and is included within exceptional reorganisation costs.
(5) Debt fees relating to loans superseded by new facilities agreed in May 2015 as well as costs associated with resetting bank covenants have been written off during the year and deemed to be exceptional.
4. INCOME TAX EXPENSE
| 2015 | 2014 |
| £'000 | £'000 |
Current tax expense | 855 | 1,342 |
Prior year under/(over) provision of tax | (144) | 73 |
| 711 | 1,415 |
Deferred tax expense resulting from the origination and reversal of temporary differences | (1,141) | (187) |
Tax on profit on ordinary activities | (430) | 1,228 |
Factors affecting tax charge for the year
The tax assessed for the year is different to the standard rate of corporation tax in the UK (20.25%). The differences are explained below:
| 2015 | 2014 |
| £'000 | £'000 |
Profit on ordinary activities before tax | (8,581) | 6,300 |
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.25% (2014: 21.5%) | (1,737) | 1,355 |
Effects of: |
|
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- group adjustments not allowable for tax | - | 19 |
- income not subject to tax | (315) | (384) |
- expenses not allowable for tax purposes | 1,532 | 265 |
- difference in tax rates | 234 | (100) |
- prior year under/(over) provision of tax and deferred tax | (144) | 73 |
Total tax charge for the year | (430) | 1,228 |
The standard rate of corporation tax in the UK is now 20% since 1 April 2015. The rate will decrease to 19% from 1 April and 2017 and to 18% from 1 April 2020.
5. EARNINGS PER SHARE
| 2015 | 2014 |
| £'000 | £'000 |
Numerator |
|
|
(Loss)/earnings used in basic and diluted EPS | (8,151) | 5,072 |
| 2015 | 2014 |
| Number | Number |
Denominator |
|
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Weighted average number of shares used in basic EPS | 18,405,384 | 17,628,831 |
Effects of share options | - | 457,729 |
Weighted average number of shares used in diluted EPS | 18,405,384 | 18,086,560 |
At the end of the year, the Company had in issue 1,156,801 (2014: 180,500) share options which have not been included in the calculation of diluted EPS because their effects are anti-dilutive. These share options could be dilutive in the future.
6. |
| DIVIDENDS |
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| 2015 | 2014 | |||
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| £'000 | £'000 | |||
| Final dividend of 4.00 pence (2014: 3.90 pence) per ordinary share proposed and paid during the year relating to the previous year's results | 735 | 676 | |||
| Interim dividend of 1.00 pence (2014: 2.20 pence) per ordinary share paid during the year | 184 | 405 | |||
|
| 919 | 1,081 | |||
The Directors are not proposing a final dividend (2014: 4.00 pence totalling £735,000), resulting in dividends for the whole year of 1.00 pence (2014: 6.20 pence) per share.
7. | ANNUAL REPORT AND ACCOUNTS |
| The annual report and accounts will be posted to shareholders shortly and will be available for members of the public at the Company's registered office Second Avenue, Centrum 100, Burton on Trent, DE14 2WF, and on the company's website www.northbridgegroup.co.uk.
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8. ANNUAL GENERAL MEETING
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The Company's Annual General Meeting is to be held at the offices of Buchanan Communications, 107 Cheapside, London, EC2V 6DN on 26 May 2016, commencing at 12.00 noon.
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