Northbridge Industrial Services plc (LON:NBI), the industrial services and rental company, has issued the following pre-close trading update in advance of its interim results announcement for the six months ended 30 June 2020, which is scheduled to be released on 30 September 2020.
Overall trading in the six months remained resilient despite the coronavirus pandemic. Total revenue was down by just 4.8% compared with the previous year, primarily in the second quarter as the lockdowns took effect. However, revenue mix between sales and rental and Crestchic and Tasman fluctuated widely, as the various pandemic responses worked through our regional networks.
The Group’s manufacturing site in the UK successfully maintained production and deliveries throughout this period and orders for the sale of loadbanks remain at record levels. Our rental operations were, however, affected by the lack of access to customer sites, border closures, quarantine regulations, and the lack of rig crews because of international travel bans. Towards the end of the second quarter Northbridge experienced the beginning of a return of some rental volumes, particularly in Crestchic power reliability work.
The decrease in revenue will be mostly offset by a reduction in operating costs and around £0.2 million of various government support and we expect the overall trading result for the first six months of 2020 to be similar to the same period in 2019.
The Group will give a further update on current trading and the impact of Covid-19 on the businesses as well as the outlook in the interim results announcement on 30 September.
Net debt (before IFRS 16) was £6.3 million at 30 June (31 December 2019: £6.4m) which included £4.0 million of convertible loan notes. Net bank debt was £2.3 million at 30 June (31 December 2019: £2.4m) with cash on hand of £4.1 million.
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.
Northbridge Industrial Services has two core activities, Crestchic Loadbanks (Crestchic) and Tasman Oil Tools (Tasman). 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 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 and European activities of Crestchic continue to perform well, albeit interrupted by various regional lockdowns, and we believe a bounce back recovery is on the way. The services we provide to this sector are largely resilient to market conditions, and renewables and data centres, in particular, will continue to play an increasingly important part of this market.
The US operation, which we started in 2016, has continued to grow revenues and our future in this region continues to look promising. Our other overseas markets for power projects, principally relating to natural resources and shipyards, have been more widely affected by Covid-19 with these locations relying more on an international workforce where travel restrictions and quarantine impact their availability.
Crestchic manufacturing, having started 2020 with its largest ever new year order book for the second consecutive year, continues to perform exceptionally well.
Tasman – Drilling tool rental
The improvement in trading experienced by Tasman during 2019 continued strongly into the first quarter of 2020, with the division achieving a trading profit and positive cash flow for the first time in five years. The impact of Covid-19 was most apparent during the second quarter, as rig operators experienced logistical 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 into 2021.
The fall in demand of 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 remained constant and further exploration and production projects have been scheduled to begin as the pandemic eases. Oil production currently accounts for only 25 % of our operational activity.
Despite the interruption from Covid-19 which effected trading late in the second quarter, year-on-year revenue is showing gains in most of Tasman’s operations, albeit from a low base. It is expected that the effects of Covid-19 will continue to impact into the second half, but we are confident of the long-term nature of this operation.