Northbridge Industrial Services delivers resilient performance


Northbridge Industrial Services plc (LON:NBI), the industrial services and rental company, has announced its unaudited interim results for the six-month period ended 30 June 2020.


·   Overall business has shown operational resilience in the face of Covid-19 with Group revenue only 4.5% lower at £16.0 million (2019: £16.8 million)

·   Third consecutive pre-exceptional half-yearly profit before tax

·   Gross profit 8.1% lower at £6.9 million (2019: £7.5 million) as lockdown impacted rental revenues more than sales

·   EBITDA* 6.3% lower at £3.2 million (2019: £3.4 million)

·   Cash generation from operations* increased substantially by 24% to £3.2 million (2019: £2.6 million)

·   Exceptional impairment of £7.1 million relating to the intangible assets recognised on the 2013 acquisition of Tasman New Zealand and £0.6 million relating to working capital investments in joint ventures as a result of Covid-19 and other local factors

·   Net debt*, including £4 million of convertible debt, of less than one times twelve month rolling EBITDA* at £6.3 million (2019 year end: £6.4 million)

·   Successful renegotiation of financing facilities extending one year to June 2022 in August 2020

·   Continuing record level of factory orders at Crestchic

·   Growing success for Crestchic in North American market

* – excluding the impact of IFRS 16; reconciliation included in the Finance Director’s report

Commenting on the results and the outlook, Eric Hook, Chief Executive of Northbridge, said:

I am pleased to report that Northbridge has delivered a resilient performance against a context of significant disruption as a result of the Covid-19 pandemic. At the start of the year before the beginning of market volatility, we witnessed the continued momentum enjoyed in 2019. In particular, there was significant revenue growth by our drilling tools business, Tasman, and the largest ever order book for manufactured units within our Crestchic power reliability operations. 

“In the second quarter our businesses were interrupted in nearly all geographies, and the robust performance is testament to the strength of our global teams who worked through the crisis with commitment and flexibility. Looking ahead, we anticipate that Covid-19 disruption will impact into the second half, but we continue to believe in the long-term growth of the Group as we move forward with confidence.” 

Chief Executive’s statement

We are pleased to present our interim results for the six month period to 30 June 2020.

Trading operations during the first half of 2020 can be separated into two distinct quarters; before Covid-19 and the associated global restrictions and after the first onset of Covid-19 protocols. The first quarter, up to the last week of March, continued to experience the strong recovery enjoyed during 2019 in most of our markets. This was particularly true for the Tasman group, where year on year revenue showed strong revenue growth. The second quarter experienced the full impact of the pandemic and the resultant national lockdowns in our operating areas.

Overall trading in the six months remained resilient in the context of the Covid-19 pandemic. Total revenue was down by just 4.5% to £16.0 million (2019: £16.8 million), with rental revenue down in the second quarter. However, revenue mix between sales and rental, between Crestchic and Tasman, and between the individual quarters, fluctuated widely, as the various pandemic responses worked through our regional networks. The comparative is also influenced by the timing of large load testing contracts which vary year to year.

The decrease in revenue has mostly been offset by a reduction of operating costs of 4.7% to £6.4 million (2019: £6.7 million), which included a voluntary salary reduction by senior staff during the second quarter. Other operating income for the period of £0.2 million (2019: Nil) related to the receipt of various governmental support payments received during lockdown and a further £0.1 million is expected in the second half. Gross profits were reduced to £6.9 million (2019: £7.5 million) reflecting the swing to unit sales from higher margin rentals. Cash generated from operations rose by 24% to £3.2 million (2019: £2.6 million). The Group continued to invest and expenditure on the hire fleet doubled to £2.4 million (2019: £1.2 million). Pre-exceptional profit before tax was £35,000 compared to £22,000 in 2019.

The impact of Covid-19 on some of our operations has caused the Board to re-examine the holding value of intangible assets. Our conclusion has led to the impairment of the goodwill created on the 2013 acquisition of Tasman Oil Tools (New Zealand) and £7.1 million was included as an exceptional impairment in the period. We remain committed to the New Zealand market which we believe has an exciting future particularly in renewables and other more sustainable activities. The Group has no further intangible assets relating to the Tasman division. Full details of the overall impairment review undertaken on 30 June 2020 are included in note 2 of this report.

As announced on 25 June 2020, an agreement has been reached with the Group’s bank and loan note holders to extend the maturity of the bank facilities and loan notes by one year to June 2022. We are pleased to confirm that this process has now been formally concluded and amended agreements have been signed by all parties.

Overall net debt (before IFRS 16) was £6.3 million at 30 June 2020, which includes £4.0 million of convertible loan notes. Net bank debt was £2.3 million at 30 June 2020 and included cash on hand of £4.1 million.

Divisional Trading

Northbridge has two core activities, Crestchic Ltd and Tasman Ltd. Crestchic is a specialist electrical equipment business which manufactures, sells and rents loadbanks and transformers from its base in Burton on Trent and has depots in the USA, France, Germany, Belgium, UAE, Singapore and China. Tasman rents drilling equipment and provides services to the oil, gas, carbon capture and geothermal industries from its sites in Australia, New Zealand, Malaysia, Singapore and the UAE.

Crestchic – Electrical power reliability

The UK, European and USA activities of Crestchic continue to perform well, albeit interrupted by various regional lockdowns. The services we provide to this sector are largely resilient to market economic volatility as power reliability, renewables and data centres continue to play an increasingly important part in worldwide markets. Our other overseas market, principally relating to natural resources, shipyards and large energy projects, has been more widely affected by Covid-19, as these activities rely on an international skilled workforce and travel restriction and quarantine impact their availability.

Quarterly revenue comparatives (£’m):

Crestchic hire2.
Crestchic sales2.
Crestchic total4.76.311.

Crestchic manufacturing, having started 2020 with its largest ever new year order book for the second consecutive year, continues to perform strongly.

Tasman – Drilling tool rental

The improvement in trading experienced by Tasman during 2019 continued strongly into the first quarter of 2020, with the division showing a trading profit and positive cash flows for the first time in four years. The impact of Covid-19 was most apparent during the second quarter, as rig operators experienced problems with rig crews, either testing positive or being affected by international travel bans. This has led to a number of projects being delayed until the fourth quarter of 2020 and also into 2021.

The fall in demand for crude oil globally also weighs on the sector, however in our focused corner of the market in Australasia, South East Asia and the Middle East, natural gas, LNG and geothermal fluid demand has held up and further exploration and production projects have been scheduled to begin as the pandemic eases. Oil production currently only accounts for 25% of our operational activity.

Quarterly revenue comparatives (£’m):

Tasman hire2.
Tasman sales0.
Tasman total2.

Despite the interruption from Covid-19, year-on-year revenues are showing significant gains in most of Tasman, albeit from a low base, and we are confident of the long-term future of the operation.

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Despite the strong overall improvements in the Tasman Group’s revenues since 2016, current events in some local markets, largely as a result of the pandemic, have caused the Board to review the carrying value of intangible assets, particularly in New Zealand.

The acquisition of Tasman (New Zealand) (”TNZ”) in 2013 led to the establishment of balance sheet intangible assets of £9.5 million, split between goodwill and other intangibles. After £1.6 million of impairment in 2015 and ongoing amortisation of other intangibles its carrying value at 30 June 2020 was £7.1 million. TNZ has a substantial hire fleet and generated all its revenue from the geothermal, gas and oil markets. The impact of Covid-19, and the highly uncertain future of the Tiwai aluminium smelter, which consumes 13% of NZ electricity capacity, has caused us to re-appraise the carrying value of the investment and as a consequence, we have written the intangible to zero. We believe TNZ has a good long-term future, albeit at lower revenues than previously expected and its hire fleet can also be shared by other Tasman locations around the region. There are no further intangible assets relating to Tasman.

The impact of the pandemic on trading in our Malaysian joint venture has affected the ability of the joint venture to repay amounts owed to the Group as it falls due and in recognition of this an impairment provision of £0.6 million has been made against the receivable. Further details relating to the impairment process can be found in note 2 to this report.

Summary and outlook for 2020

In summary, the overall interim trading result was very similar to the equivalent period in 2019 and we expect a similar performance in the second half of year, demonstrating the resilience of the Group during the Covid-19 pandemic. It was particularly important for us to maintain factory production, due to both the record order book and the essential nature of our products for power reliability and data system resilience. Likewise, our rental operations, which are at the forefront of supporting our industrial and commercial customers continue to operate effectively. Our success in this has been down to our staff, who have worked through this crisis with commitment and flexibility.

We believe the impact of the pandemic on the overall economy represents an interruption to the recovery in our markets rather than a fundamental long-term change.  We recognize that the impetus towards a ‘green’ recovery will accelerate as the crisis reduces, and our focus remains to continue to develop our ESG values together with our development of services and equipment to benefit from this move.

Eric Hook

Chief Executive

30 September 2020

Finance Director’s report

Revenue and profit before tax

Overall revenue for the period was down by 4.5% to £16.0m (2019: £16.8 million) with large variations across revenue streams and across the first and second quarters as described in the Chief Executive’s Statement.

Sales revenue made up 42% of total revenue in the first half of 2020 compared to 38% in 2019 and this has driven the decrease in the overall margin from 48% to 46%.

Other operating income of £0.2 million (2019: £nil) was recognised in the period and relates to various government support initiatives across the group. This includes job keeper support in Australia, New Zealand and Singapore as well as limited use of the UK furlough scheme. At the date of this report all staff have returned to work.

Operating costs decreased from £6.7 million to £6.4 million which was mainly due to a voluntary 20% pay decrease for all senior salaried staff in the second quarter and a decrease in staff travel costs.

Balance sheet, debt and cashflow

Net hire fleet additions have risen to £2.1 million in the year (2019: £0.9 million) with the majority of this committed to prior to the Covid-19 outbreak, although investment opportunities with short payback periods and good long term returns have continued to arise since. The 2020 additions include an increase to the number of loadbanks held in the US and oil tools for secured projects across the Tasman division, in Asia and Australia in particular.

Inventory levels have increased since the previous year end to £5.1 million (2019 year end: £3.9 million) due to an increase in the level of loadbank components held in the UK factory. When the pandemic began to affect the Crestchic business in March it was decided to increase stock levels to guard against the risk of future supply shortages given the historically high sales order book. This strategy has been successful in keeping the factory output high but a reduction in stock levels will now be targeted as the supply risk from the pandemic eases.

Trade and other receivables have increased slightly from £9.1 million at the previous year end to £9.4 million at the end of June 2020. Trade debtors and debtor days remain close to the levels seen at 31 December 2019.

Period end net debt stood at £6.3 million (2019 year end: £6.4 million) which includes £4.0 million of debt convertible to equity at 90 pence per share. As part of the extension to financing facilities which was signed on 11 August, the maturity of the convertible debt was extended by one year to June 2022 and, reflecting the movement in the share price since the original issue, the strike price was lowered from 125 pence per share to 90 pence per share. The Group did not defer the payment of any rent, payroll taxes, VAT or GST in the period.

The Group’s leverage, as calculated by dividing net debt by twelve month rolling EBITDA, has remained consistent with that seen at 31 December 2019 at 0.9. The Group continued to increase the cash generated from operations which totalled £3.2 million during the period (2019: £2.6 million).

The Group is renewing its focus on return on capital with all capital expenditure projects reviewed for their payback periods and medium to long term return on capital. More details on return on capital will be provided with the year end results.


The table below shows the impact of IFRS 16 on the Group’s EBITDA, cash generated from operations and net debt. For the purposes of comparison with historical figures the commentary in the Chief Executive’s Statement and this report and the highlights refer to these figures excluding the impact of IFRS 16.

£’000As reportedIFRS 16 impactexcluding IFRS 16 impact
Six month period ended 30 June 20203,6504843,166
Six month period ended 30 June 20193,8234443,379
Twelve month period ended 31 December 20197,7887567,032
Cash generated from operations   
Six month period ended 30 June 20203,6664843,182
Six month period ended 30 June 20193,0084442,564
Twelve month period ended 31 December 20198,7987568,042
Net debt as at:   
30 June 20207,4301,1696,261
31 December 20197,7521,3086,444
30 June 20199,9311,3988,533

Going concern

Northbridge Industrial Services’ annual report and accounts for the period ended 31 December 2019 was signed and released on 7 April 2020 when the uncertainty surrounding Covid-19 was close to its peak. At that time the Directors acknowledged that although they were satisfied from stress testing their forecasts and the headroom that this showed on the bank covenants that the Group would be able to continue to operate for the foreseeable future, the issues connected to Covid-19 and the decline in market oil price created significant difficulties in being able to forecast future trading and cash flows and that actual results achieved might be significantly different to management’s expectations in the forecasts prepared to assess funding requirements and going concern.

Since 7 April some of the uncertainties have become a little clearer and the risks for the Group have certainly decreased:

–       The factory remained operational throughout the period and the supply chain held up well

–       Hire revenue has rebounded towards the middle of the third quarter

–       Brent remains above $40 per barrel

–       The bank and loan note facilities have been extended to June 2022

–       The bank facility extension included a capital repayment holiday which increased liquidity and headroom on covenants

–       The sales order book for the UK factory remains at a record level with over £2m already secured for the first quarter of 2021

Whilst the Directors at Northbridge continue to acknowledge that Covid-19 is causing a level of general uncertainty, and in particular around oil and gas investment in 2021 and beyond, the mostly positive news since April, except for the impairment provisions, has improved the internal downside sensitivity scenarios and significantly increased the level of liquidity and covenant headroom.

The Directors do not believe that material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern currently exist.

Iwan Phillips

Finance Director

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