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 2021, which will be announced on 30 September 2021.
The encouraging start to the year reported in our AGM statement in June 2021 has been maintained and, as expected, revenue and pre-exceptional pre-tax profits for the first half of the year were significantly ahead of 2020 and are now ahead of management’s expectations.
Revenue for the Period was up by 22% to £19.6m compared with the same period in previous year (H1 2020: £16m), with hire revenue up by 28% and sales and service revenue up by 14%. As a result of the shift in revenue mix towards hire, the gross margin is also higher than 2020.
Operating costs for the Period will be up on H1 2020 as Group activity levels edge towards more typical levels and no Government support was received in the period (H1 2020: £0.2m).
Hire fleet capital expenditure for the Period was £0.9m and pre-IFRS 16 net debt at 30 June 2021, post the settlement of the loan notes and related conversion and early repayment fee, was significantly reduced to £3.5m (31 December 2020: £5.4m, 30 June 2020: £6.3m).
Crestchic – Electrical power reliability
The Crestchic factory remains at full capacity and the order intake continues to be strong. Sales and service revenue for the period was £7.1m which is up by 19% on 2020 (£6.0m). Sales to the US and data centres worldwide remain strong.
Although Crestchic is managing to pass on most of the cost increases seen from the rise in commodity and shipping prices, the supply chain disruption experienced in 2020 is continuing to slightly affect margins as a consequence of extended assembly times.
Hire revenue for H1 2021 was £8.7m. After adjusting for £1.3m of low margin pass through revenue, underlying hire revenue of £7.4m, driven by a recovery in major projects, has returned to pre-pandemic levels (H1 2020: £5.0m, H1 2019: £7.2m).
As noted in the Northbridge Industrial Services AGM statement, revenue in the Far East was particularly good in the first quarter before revenue in the US, Europe and the Middle East picked up strongly in the second quarter.
Tasman – Drilling tool rental
H1 2020, prior to the full trading impact of Covid-19, was a profitable period for Tasman. Despite an uplift in activity towards the end of 2020, the drilling tool rental industry has not yet recovered to pre-pandemic levels.
Revenue for H1 2021 was £3.8m which is 25% lower than H1 2020 (£5.0m).
Despite rental revenue not recovering as quickly as anticipated earlier in the year, the business has been resilient, and prudent management of the division’s operating and capital expenditure has restricted the loss before tax to £0.2m and has seen it generate a positive free cash flow.
The Group has made significant progress during the first half of the year on a number of strategic initiatives:
· The restructure of the Board has been completed and has resulted in a flatter structure and lower costs.
· HSBC has been appointed as banker to the Group and we have secured increased, simplified and lower cost bank facilities which in turn enabled the redemption/conversion of the Group’s high cost convertible loan notes.
· Planning consent has been received for the expansion of our factory at Burton on Trent and the construction contracts have been placed. Construction is expected to start shortly and the new facility is expected to commence production in H1 2022.
· In the light of continuing strong demand from the Data Centre sector, the Group has successfully deployed a trial fleet of server emulators into the hire fleet and have placed factory orders for the manufacture of an additional 25 300KW loadbanks. Additionally, we have won our first significant order to supply loadbanks to a major ecommerce retailer.
· We are taking steps to restructure the Tasman Oil Tool Division to return it to profitability and, in parallel, are actively negotiating with potential buyers for the Division.
We can now confidently state that the Crestchic factory will be at capacity until the year end. Visibility on Crestchic rental projects is relatively good and is now into the beginning of the final quarter with revenues in the Middle East, Europe and the US set to continue to increase as the year progresses.
The performance of Crestchic to date and its forward pipeline and momentum, along with a modest improvement for Tasman in the second half, has led to an increase in management’s expectations for the Group’s performance for the full year.