Source - RNS
RNS Number : 6483K
Northbridge Industrial Services PLC
12 April 2018
 

 

                                                                                                                                                                                12 April 2018

 

Northbridge Industrial Services Plc

("Northbridge" or the "Group" or the "Company")

 

 

Preliminary Results for the Year Ended 31 December 2017

 

 

Northbridge Industrial Services plc, the industrial services and rental company, today announces its preliminary results for the year ended 31 December 2017, which are in line with market expectations.

 

Key points:

 

·  Group revenue up 7.9% to £25.7 million (2016: £23.8 million)

·  Cash generated from operations up 48.5% to £2.6 million (2016: £1.8 million)

·  EBITDA of £3.2 million (2016: pre-exceptional EBITDA of £3.4 million)

·  Loss before tax reduced to £4.4 million (2016: £5.5 million)

·  No exceptional charges in 2017 (2016: £1.4 million)

·  Net debt reduced by £0.8 million to £8.7 million (2016: £9.5 million)

·  Tangible net assets of £22.9 million (2016: £27.7 million)

·  Since the year end, a successful re-organisation of Group debt facilities until 2021, this includes the issuance of £4.0 million of loan notes supported by a substantial existing shareholder

·  Management are now focused on a market recovery for 2018 and beyond.

 

 

Eric Hook, Chief Executive Officer, commenting on the results said:

 

"After an unprecedented three very difficult years in the oil and gas industry, which have adversely affected both parts of our business, we now believe that a recovery is in sight. During 2017 we saw a stabilisation in our oil tool revenues albeit at a very low level, as actions taken by the producer nations have largely eliminated crude oil surpluses. The additional cash flow enjoyed by the industry due to higher oil prices; is now enabling a return to investment in exploration and production, which will benefit both Tasman Oil Tools and Crestchic Loadbanks. The work we have undertaken to re-organise the Group and reduce costs over the last three challenging years will also help us return to profits in the future.

 

Since the year end we have also re-organised and simplified our debt structure by issuing £4.0 million of loan notes. The issue of the loan notes diversifies our funding sources and has enabled us to consolidate our future bank funding solely with RBS our existing UK lead bank whilst allowing the Group to fully repay KBC Bank who were previously party to the joint banking facility. The overall level of debt is not impacted by the new facilities and will continue to amortise. However, this new facility with RBS extends the Group's facility to June 2021 and capital repayments have been reduced accordingly. Together with the absence of capital repayments in respect of the loan notes, this will increase our free cash resources and provide flexibility to invest for growth as the recovery gathers pace. Having kept our core activities in readiness we are now firmly focussed on the future".

 

Outlook

 

The sustained recovery in the oil market since the late summer of 2017 has seen the crude oil price stabilise at its highest level in three years. This has given the industry some confidence for 2018 and beyond. The additional cash flow as a result of higher crude prices has enabled the oil majors and national oil companies to start initiating a return to capital expenditure. This impact is likely to be felt in the sectors we supply in both Crestchic and Tasman; however, the timing may be different in each industry.

 

We have seen some improvement in the important rental revenue in Tasman Oil Tools, albeit from a very low base. We expect this to continue in 2018 and beyond. Pricing is still at a low point, but, as volumes increase and demand improves, we expect pricing to stabilise at higher levels, but it probably will not return to pre-2014 levels for some years. Some drilling has recommenced in the geothermal fields of New Zealand and 2018 is likely to be the most active year since 2015.

 

A nascent recovery in exploration and production ("E&P") throughout the Asia-Pacific region will benefit Tasman, as this is where that business is most active; this will also be supplemented by our new JV in Malaysia. The market recovery will probably be slow and is unlikely to be linear, as the wave of M&A activity in the sector works through and the investment plans for E&P capital expenditure begin to crystallise.

 

For Crestchic, our electrical testing business, a return to activity in the oil market will be felt primarily in the marine sector. The high levels of scrappage in the oil and gas rig market, with substantial amounts of older equipment retired, will lead to further investment in new rigs, tankers and LNG carriers. This is a key market for our products and we should see some improvements over the next few years. Our services are generally engaged during the last element of power commissioning projects before the vessels are launched. The other part of Crestchic's business, which has been unaffected by the oil and gas downturn, is involved in power commissioning and reliability testing in western economies. This has continued to see consistent demand.

 

The traditional use of loadbanks, to test "real-time" power output from standby power generators, has now been supplemented by their increasing use in data centres, distributed generation, and frequency management. These are all growing parts of the industry we serve and are likely to continue to grow for years to come establishing significant markets in their own right.

 

We have recently added further equipment and personnel to Crestchic's operation in North America which is potentially one of the largest markets in the world for our services. Early indications have been encouraging and we are confident in its long-term profitable future.

 

Northbridge is very well placed to benefit from the current recovery. Whilst remaining cash generative, we have completed our restructuring and now have a much lower cost base throughout the Group. Having retained all our operating bases during the downturn, and maintained relationships with all our customers, we expect to be able to exploit the high operational gearing inherent in our business model, and the expected additional revenue will support bottom-line growth.

 

 

 

 

For further information

 

Northbridge Industrial Services plc                                                                                                         01283 531645

Eric Hook, Chief Executive Officer                                                                                                                          

Iwan Phillips, Finance Director

 

Stockdale Securities Limited (Nominated Adviser and Broker)                                                           020 7601 6100

Robert Finlay / Antonio Bossi / Henry Willcocks

 

Buchanan                                                                                                                                                     020 7466 5000

Charles Ryland / Stephanie Watson / Catriona Flint

 

About Northbridge:

 

Northbridge Industrial Services plc hires and sells specialist industrial equipment. With offices or agents in the UK, USA, The Middle East, 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 2017.

 

BUSINESS REVIEW

 

The sustained recovery in the price of oil since the summer of 2017, as a result of successful actions by OPEC and other producer nations to restrict production and reduce the supply overhang, has improved sentiment in the market.

 

This confidence and the additional cashflow driven directly by higher crude prices, has enabled the oil companies to begin some embryonic exploration and production capital expenditure. Though this came too late to have a material impact on our revenue from this sector for the year as a whole, we were pleased to see more positive trading in the last quarter.

 

The reduction in investment by the oil and gas majors over the last three years has 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 income streams, mostly operating from western economies, which have been less impacted by the downturn in the oil and gas industry, as they are more focused towards power reliability and utilities.

 

Our reorganisation, which was carried out during 2015 and 2016, has been completed. This included freezing all expansion capital and other non-essential fleet replacements, exiting all non-core businesses and converting the assets into cash and closing non-performing locations. Further streamlining has focused on reducing debt and overhead costs throughout the Group. Support from shareholders through an equity raise in 2016 made a significant reduction in the Group's debt.

 

Substantial savings have been made in the core business since the market downturn and the significant reduction of costs in our overseas locations has given us the confidence to maintain our presence and operating readiness of these locations. By taking these actions throughout the Group, we were able to manage cash and management resources without any further exceptional costs in 2017.

 

We have made a conscious effort to maintain good relations with our customer base and have continued to improve our quality assurance regime and the availability of our hire fleet during this difficult period. Modest, targeted capital expenditure has enabled us to focus loadbank investment on growing markets in North America and China and opportunities emerging from the growth in renewable energy generation.

 

The Group is streamlined into two distinct core business activities, Crestchic Loadbanks and Tasman Oil Tools.

 

Crestchic Loadbanks, which manufactures in the UK, sells and rents electrical equipment throughout the world with depots in the UK, France, Germany, Belgium, Dubai and Singapore. It has satellite operations and agents/distributors in China, the USA, Australia and Brazil. It has a particularly strong position in Western European rental which is more focused towards power reliability. Outside the western economies, business is generated from offshore activities in the oil and gas and shipping industrial and remote locations using large amounts of power.

 

The downturn in the industries closely connected to oil and gas adversely affected this part of Crestchic's rental business. However, the growing demand from data centres and for power reliability and our start-up rental operation in North America, which continues to perform well, help compensate for this and the future looks promising. Towards the end of 2017 we took the opportunity to relocate some underutilised equipment from the Asia-Pacific region to North America and this will help to consolidate our success in that region to date. To fully exploit this market, which operates with different frequencies and voltages to most of the rest of the world, we will invest further targeted capital expenditure.

 

Our operation in China continued to generate revenue from a low cost base, and we now have a local presence with some permanently imported hire fleet. The nature of the contracts for this type of marine construction tend to migrate to the most efficient yards and we had little option but to follow.

 

On the sales side, our two biggest traditional markets, the USA and South Korea, continued to show very little demand and volumes were poor. However, new markets in the UK, which are involved in the National Grid's balancing reserve and in renewables, have begun to open up to us and we see a good future in this additional sector, not just in the UK but across the developed world.

 

Tasman Oil Tools began to experience some improvements in its market and increases in rental revenue have become more noticeable. Though these movements are not currently significant in the context of the Group, they are in the right direction and we have more confidence that they will continue into 2018 and beyond.

 

The market seems to have bottomed out and sentiment is beginning to improve, with some evidence that the huge cutbacks in exploration and field development over the last three years has impacted on future reserves, which are at a 70-year low. Recent increases in the price of crude oil and the multiple years of cost cutting amongst the oil majors have improved their cash flow to the extent that we are now seeing a modest return to exploration and production drilling. This should gain momentum in the coming years, though rates still remain depressed and are unlikely to recover fully in the short term.

 

In the three-year downturn, Tasman concentrated on cutting costs, maintaining quality systems and the readiness and availability of the hire fleet. As well as keeping customer relationships in good order, we have been developing partnerships and trading relationships to open up new markets for our existing equipment and expand our services where we already operate. In September 2017 we announced the formation of our joint venture in Malaysia with our local partner, Olio Resources SDN BHD. The new company, called Olio Tasman Oil Tools SDN BHD ("OTOT"), is 51% owned by Olio Resources and 49% owned by Northbridge and will service the oil tool rental market in Malaysia, Myanmar, Brunei, Indonesia, Cambodia, Laos, Thailand and Singapore.

 

The JV commenced trading on 1 October 2017 from two newly established locations in Labuan Island and the Kemaman Supply Base in Malaysia. Both JV partners will provide equipment for the rental fleet and OTOT will also have access to the substantial hire fleet of the Tasman Group. Olio Resources, a wholly owned Malaysian group which was established in 1994, has a strong position as an integrated solution provider in Southeast Asia and already holds key contracts for the provision of oil tools to the oil majors in Malaysia. The trading levels of OTOT in the last quarter were not significant to the Group's results as a whole, however, 2018 will benefit from a full year's trading of the JV and revenues are expected to build into the future.

 

Financial performance

 

Total Group revenue increased by 7.9% to £25.7 million (2016: £23.8 million); this is the first increase since 2014 and was driven almost entirely by an increase in the sale of new loadbanks following a relatively poor 2016. Total rental revenue was unchanged at £15.8 million (2016: £15.8 million), with Tasman rental up at £4.6 million (2016: £3.3 million, including £0.2 million in revenue from the JV in Malaysia) and Cretchic rentals reducing to £11.2 million (2016: £12.5 million).

 

Margins on total Group sales of equipment rose to 39.1% (2016: 38.5%), though overall gross margin was down at 36.4% (2016: 38.4%) due to the change in revenue mix between hire and sales. For Tasman Oil Tools, where a full depreciation charge is made on the entire hire fleet irrespective of utilisation, overall margins were slightly down at 8.2% (2016: 10.2%); however, rental margins have now moved into positive territory at 0.6% (2016: -1.4%) as rental revenue improved.

 

Operating expenses for the full year, including the costs of our new operations in the USA (Crestchic) and Malaysia (Tasman), were £12.9 million (2016: £12.7 million).

 

There were no exceptional costs charged during 2017 as we now believe our rationalisation and restructuring efforts have been largely completed (2016: £1.4 million). Total exceptional costs since the end of 2014 amounted to £8.6 million and included an impairment charge to intangible assets of £4.9 million in 2015. Having taken early and decisive action to restructure the business when the downturn first began to impact trading, we are now in a good position to benefit from any sustained recovery.

 

Losses for the year were £4.4 million (pre-exceptional losses for 2016: £4.1 million, post-exceptional: £5.5 million).

 

The Directors have reviewed the carrying value of both tangible and intangible assets and have concluded that no further impairment charge is necessary.  Earnings before interest, tax, depreciation and amortisation ("EBITDA") was £3.2 million (2016: £3.4 million pre-exceptional, £2.0 million post-exceptional).

 

Crestchic Loadbanks and Northbridge Transformers (Crestchic)

 

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, is 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 is based in Belgium, offers specialist transformers for rental throughout the world; it is also able to use Crestchic's depots in the Middle East and in Singapore as a conduit for its activities. Substantial investment in this activity over the last few years has meant that we have been able to grow this business from its original base in Belgium to a worldwide audience.

 

The oil and gas downturn has continued to impact Crestchic's sales of manufactured units, but this has been partly offset by success in new markets in the power reliability and renewable sector during 2017; sales were up by 32.1% to £9.0 million compared with 2016: £6.8 million. The two main sales markets of South Korea and the USA continued with their market-driven weakness; however, we do believe they will recover in the medium term. In the meantime, our new rental operation in North America continues to gain traction, and further equipment which has been relocated from the Far Eastern markets will help the momentum continue into the future.

 

Our rental activities in the power reliability market in western economies enjoyed another record year and turnover was up 10.7% to £6.2 million (2016: £5.6 million). Overall rental revenue was down to £11.2 million (2016: £12.5 million) due to the continued downturn in the oil and gas markets in the Middle and Far East.

 

Overall gross margins were 44.2% (2016: 45.5%). The improvement in sales revenue compared with higher rental revenue was the main cause of the change in mix and led to a slight downward movement of gross margins. Within the sales of manufactured units, gross margins improved to 37.0% (2016: 35.6%).

 

 

Tasman Oil Tools (Tasman)

 

Tasman now operates from a single corporate platform, with an integrated website and unified quality, health, safety and environmental (''QHSE'') systems, with depots in Australia, Dubai, New Zealand and now Malaysia. It offers a full range of downhole oil tools to the oil, gas and geothermal industries throughout the Middle East, the Far East and Australasia. This is predominantly a rental business, and revenue has suffered significantly as a result of the downturn in drilling activities in the last three years. However, we now believe that there are signs of a recovery in the exploration and production markets that we serve and total revenue during 2017 was £5.6 million, an increase of 25.0% on the same period last year (2016: £4.5 million). The impact of the joint venture with Olio Resources SDN BHD was not material for the last quarter and the revenue was £0.2 million.

 

Gross margin fell to 8.2% (2016: 10.2%), caused by lower sales and service revenue; however rental margins broke into positive territory at 0.6% compared with a gross margin loss in 2016 of 1.4%. This was due to modest improvements in revenue and despite a full depreciation charge against the fleet is taken irrespective of the hire status. Lower rental volumes also lead to lower service charges to the customer, which also impacts both turnover and gross profits. Operating losses of £3.4 million were an improvement compared to the pre-exceptional loss of £3.6 million in 2016. There were no exceptional charges.

 

There are now some positive signs that the prolonged downturn in the oil and gas industry is coming to a close, but it is still early in the cycle. We do not expect an upturn in our fortunes to be linear as current contracts that come to a close will still be difficult to replace quickly and rates are still at a low level.

 

We have seen significant consolidation in our market in recent months, both in terms of M&A activity and with changes in exploration acreages and licences. Expectations in the market are that this is a precursor to new capital expenditure rather than purely a defensive mechanism.

 

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. The split of the total revenue between its two reportable segments as well as a split of total revenue between hire and sales 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 operating profit level.

 

This impact is often referred to as operational gearing. Gross profit for the year increased to £9.3 million (2016: £9.1 million) following the improvement of overall revenue.

 

Operating losses were reduced by 23% to £3.8 million (2016: £4.9 million). Excluding exceptional costs, operating losses rose from £3.6 million in 2016 to £3.8 million.

 

Net finance costs were unchanged in the year at £0.6 million and the Group incurred no exceptional costs during 2017, following the major reorganisation that took place during 2015 and 2016.

 

Losses before tax amounted to £4.4 million (2016: £5.5 million). Pre-exceptional losses before tax in 2016 totalled £4.1 million.

 

Earnings per share

 

The basic Loss Per Share ("LPS") of 17.9 pence (2016: 26.2 pence) and diluted LPS of 17.9 pence (2016: 26.2 pence) have been arrived at in accordance with the calculations contained in note 5.

 

Balance sheet and debt

 

Total net assets at 31 December 2017 were £35.7 million compared to £41.8 million in 2016. The decrease in net assets during the year is due to the loss for the year of £4.6 million and the negative movements in the foreign exchange reserve of £1.5 million.

 

Net assets per share at the year end are 138 pence (2016: 160 pence).

 

Hire fleet additions have been cut back to £0.5 million (2016: £0.8 million) during the year and have been concentrated on growth areas. Property, plant and equipment has decreased from £35.6 million to £29.3 million during the year due to net additions of £0.6 million being offset by a depreciation charge of £6.2 million and a negative movement of £0.8 million from the translation of assets held in foreign currency.

 

Inventory levels have been consistent at £3.4 million (2016: £3.5 million) and trade receivables have increased slightly to £7.3 million (2016: £7.1 million), impacted by the increase in revenue during the final quarter of 2017.

 

Notwithstanding the trading losses seen during the year, the continued benefit from the restructuring and the continuing repayment of debt led to net debt decreasing to £8.7 million (2016: £9.5 million). £2.9 million of scheduled bank and finance lease repayments were made in the year with £0.8 million of working capital related borrowings drawn. Total outstanding finance lease balances decreased from £1.2 million to £0.6 million during the year.

 

Net gearing, calculated as net debt divided by total equity, increased to 24.5% (2016: 22.7%). A further reduction in net debt is targeted for 2018.

 

Cash flow

 

The Group continued to generate cash from operating activities totalling £2.6 million during the year (2016: £1.8 million). From this £0.5 million (2016: £0.8 million) was used to purchase new hire fleet equipment, while £0.4 million (2016: £0.8 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.

 

The net cash outflow from financing activities of £2.1 million (2016: £0.1 million inflow) included repayments of bank borrowings and finance lease repayments of £2.9 million (2016: £5.1 million).

 

Income tax expense

 

The overall income tax charge for the year totalled £0.2 million (2016: £0.8 million).

 

If 2017 unutilised tax losses of £0.3 million had been recognised as a deferred tax asset the overall tax charge would have been a credit of £0.1 million (2016: £0.8 million). These losses relate to the Group's Australian entities and a deferred tax asset has prudently not been recognised at this balance sheet date, but the losses are available to be utilised against future profits. Any future recognition of a deferred tax asset will be dependent on these future profits by jurisdiction becoming more certain.

 

The Group manages taxes such that it pays the correct amount of tax in each country that it operates in, 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 and improving quality systems and customer service; and

·     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; and

·     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 sustained recovery in the oil market since the late summer of 2017 has seen the crude oil price stabilise at its highest level in three years. This has given the industry some confidence for 2018 and beyond. The additional cash flow as a result of higher crude prices has enabled the oil majors and national oil companies to start initiating a return to capital expenditure. This impact is likely to be felt in the sectors we supply in both Crestchic and Tasman; however, the timing may be different in each industry.

 

We have seen some improvement in the important rental revenue in Tasman Oil Tools, albeit from a very low base. We expect this to continue in 2018 and beyond. Pricing is still at a low point, but, as volumes increase and demand improves, we expect pricing to stabilise at higher levels, but it probably will not return to pre-2014 levels for some years. Some drilling has recommenced in the geothermal fields of New Zealand and 2018 is likely to be the most active year since 2015.

 

A nascent recovery in exploration and production ("E&P") throughout the Asia-Pacific region will benefit Tasman, as this is where that business is most active; this will also be supplemented by our new JV in Malaysia. The market recovery will probably be slow and is unlikely to be linear, as the wave of M&A activity in the sector works through and the investment plans for E&P capital expenditure begin to crystallise.

 

For Crestchic, our electrical testing business, a return to activity in the oil market will be felt primarily in the marine sector. The high levels of scrappage in the oil and gas rig market, with substantial amounts of older equipment retired, will lead to further investment in new rigs, tankers and LNG carriers. This is a key market for our products and we should see some improvements over the next few years. Our services are generally engaged during the last element of power commissioning projects before the vessels are launched. The other part of Crestchic's business, which has been unaffected by the oil and gas downturn, is involved in power commissioning and reliability testing in western economies. This has continued to see consistent demand.

 

The traditional use of loadbanks, to test "real-time" power output from standby power generators, has now been supplemented by their increasing use in data centres, distributed generation, and frequency management. These are all growing parts of the industry we serve and are likely to continue to grow for years to come establishing significant markets in their own right.

 

We have recently added further equipment and personnel to Crestchic's operation in North America which is potentially one of the largest markets in the world for our services. Early indications have been encouraging and we are confident in its long-term profitable future.

 

Northbridge is very well placed to benefit from the current recovery. Whilst remaining cash generative, we have completed our restructuring and now have a much lower cost base throughout the Group. Having retained all our operating bases during the downturn, and maintained relationships with all our customers, we expect to be able to exploit the high operational gearing inherent in our business model, and the expected additional revenue will support bottom-line growth.

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2017

 

 

 

 

 

2017

2016

 

Note

 £'000

 £'000

Revenue

2

25,669

23,786

Cost of sales

 

(16,331)

(14,653)

Gross profit

 

9,338

9,133

Operating costs

 

 

 

Excluding exceptional items

 

(12,934)

(12,688)

Exceptional items

3

-

(1,358)

Total operating costs

 

(12,934)

(14,046)

Share of post-tax result of joint ventures

 

(188)

-

Loss from operations

 

(3,784)

(4,913)

Finance costs

 

(597)

(591)

Loss before income tax excluding exceptional items

 

(4,381)

(4,146)

Exceptional items

3

-

(1,358)

Loss before income tax

 

(4,381)

(5,504)

Income tax expense

4

(245)

(794)

Loss for the year attributable to the equity holders of the parent

 

(4,626)

(6,298)

Other comprehensive (loss)/income

 

 

 

Exchange differences on translating foreign operations

 

(1,519)

6,846

Other comprehensive (loss)/income for the year, net of tax

 

(1,519)

6,846

Total comprehensive (loss)/income for the year attributable to equity holders of the parent

 

(6,145)

548

Loss per share

 

 

 

- basic (pence)

5

(17.9)

(26.2)

- diluted (pence)

5

(17.9)

(26.2)

 

All amounts relate to continuing operations.


 


 

 

 

CONSOLIDATED BALANCE SHEET

As at 31 December 2017

 

 

 

 

2017

 

2016

 

 

£'000

£'000

 

£'000

£'000

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Intangible assets

 

12,833

 

 

14,094

 

Property, plant and equipment

 

29,281

 

 

35,623

 

Investments accounted for using the equity method

 

-

 

 

-

 

 

 

 

42,114

 

 

49,717

Current assets

 

 

 

 

 

 

Inventories

 

3,429

 

 

3,515

 

Trade and other receivables

 

9,322

 

 

9,008

 

Cash and cash equivalents

 

1,903

 

 

3,704

 

 

 

 

14,654

 

 

16,227

Total assets

 

 

56,768

 

 

65,944

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

5,383

 

 

5,571

 

Financial liabilities

 

3,617

 

 

4,367

 

Other financial liabilities

 

1,053

 

 

1,123

 

Current tax liabilities

 

1,015

 

 

673

 

 

 

 

11,068

 

 

11,734

Non-current liabilities

 

 

 

 

 

 

Financial liabilities

 

7,013

 

 

8,804

 

Deferred tax liabilities

 

3,002

 

 

3,621

 

 

 

 

10,015

 

 

12,425

Total liabilities

 

 

21,083

 

 

24,159

Total net assets

 

 

35,685

 

 

41,785

Capital and reserves attributable to equity holders of the Company

 

 

 

 

 

 

Share capital

 

 

2,611

 

 

2,611

Share premium

 

 

27,779

 

 

27,779

Merger reserve

 

 

2,810

 

 

2,810

Foreign exchange reserve

 

 

3,010

 

 

4,529

Treasury share reserve

 

 

(451)

 

 

(451)

Retained earnings

 

 

(74)

 

 

4,507

Total equity

 

 

35,685

 

 

41,785

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2017

 

 

 

 

 

 

 

Foreign

Treasury

 

 

 

Share

Share

Merger

exchange

share

Retained

 

 

capital

premium

reserve

reserve

reserve

earnings

Total

 

£'000

£'000

£'000

£'000

£'000

 £'000

Changes in equity

 

 

 

 

 

 

 

Balance at 1 January 2017

2,611

27,779

2,810

4,529

(451)

4,507

41,785

Loss for the year

-

-

-

-

-

(4,626)

(4,626)

Other comprehensive income

-

-

-

(1,519)

-

(1,519)

Total comprehensive income for the year

-

-

-

(1,519)

-

(4,626)

(6,145)

Share option expense

-

-

-

-

-

45

45

Balance at 31 December 2017

2,611

27,779

2,810

3,010

(451)

(74)

35,685

 

 

For the year ended 31 December 2016

 

 

 

 

 

 

 

Foreign

Treasury

 

 

 

Share

Share

Merger

exchange

share

Retained

 

 

capital

premium

reserve

reserve

reserve

earnings

Total

 

£'000

£'000

£'000

£'000

£'000

 £'000

Changes in equity

 

 

 

 

 

 

 

Balance at 1 January 2016

1,864

23,266

2,810

(2,317)

(451)

10,709

35,881

Loss for the year

-

-

-

-

-

(6,298)

(6,298)

Other comprehensive income

-

-

-

6,846

-

6,846

Total comprehensive income for the year

-

-

-

6,846

-

(6,298)

548

Issue of share capital

      747

4,513

-

-

-

-

5,260

Share option expense

-

-

-

-

-

96

96

Balance at 31 December 2016

2,611

27,779

2,810

4,529

(451)

4,507

41,785

 

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2017

 

 

2017

2016

 

 

 £'000

 £'000

Cash flows from operating activities

 

 

 

Net loss from ordinary activities before taxation

 

(4,381)

(5,504)

Adjustments for:

 

 

 

- amortisation of intangible assets

 

750

749

- amortisation of capitalised debt fee

 

229

117

- depreciation of tangible fixed assets

 

6,227

6,201

- profit on disposal of property, plant and equipment

 

(255)

(242)

- share of post-tax results of joint ventures

 

188

-

- finance costs

 

597

591

- share option expense

 

45

96

 

 

3,400

2,008

Decrease in inventories

 

42

135

(Increase)/ decrease in receivables

 

(620)

1,903

Decrease in payables

 

(204)

(2,283)

Cash generated from operations

 

2,618

1,763

Finance costs

 

(597)

(591)

Taxation

 

(309)

(351)

Hire fleet expenditure

 

(542)

(826)

Sale of assets within hire fleet

 

350

784

Net cash from operating activities

 

1,520

779

Cash flows from investing activities

 

 

 

Investment in joint ventures

 

(183)

-

Increase in receivables from joint ventures

 

(123)

-

Payment of deferred consideration

 

-

(1,252)

Purchase of property, plant and equipment

 

(123)

(163)

Sale of property, plant and equipment

 

70

86

Net cash used in investing activities

 

(359)

(1,329)

Cash flows from financing activities

 

 

 

Proceeds from share capital issued

 

-

5,260

Proceeds from bank and other borrowings

 

820

-

Repayment of bank borrowings

 

(2,154)

(4,078)

Repayment of finance lease creditors

 

(780)

(1,053)

Net cash (used in)/from financing activities

 

(2,114)

129

Net decrease in cash and cash equivalents

 

(953)

(421)

Cash and cash equivalents at beginning of period

 

2,146

2,175

Exchange losses on cash and cash equivalents

 

(20)

392

Cash and cash equivalents at end of period

 

1,173

2,146

 

During the period the Group acquired property, plant and hire equipment with an aggregate cost of £811,000 (2016: £989,000) of which £146,000 (2016: £nil) was acquired by means of finance leases. This includes £542,000 (2016: £826,000) of hire fleet additions of which £nil (2016: £nil) 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 £730,000 (2016: £1,558,000) held within 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 2017 or 2016, but is derived from those accounts. Statutory accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies and those for the year ended 31 December 2017 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 reports for the year end 31 December 2017 and 31 December 2016 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 78% (2016: 81%) of the Group's revenue. This includes the Crestchic, NTX, Crestchic France, NME, CME, CAP, USA and China businesses; and

·     Tasman oil tools- this segment is involved in the hire and sale of oil tools and loadcells and contributes 22% (2016: 19%) of the Group's revenue. This includes the TOTAU, TOTNZ, TOTAE, TOTSEA and the Group's 49% share of OTOT.

 

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

£'000

Total

£'000

Other trading entities

£'000

Other

including

consolidation

adjustments

£'000

2017

Total

£'000

Revenue from external customers

20,244

5,587

25,831

-

(162)

25,669

Finance expense

(106)

(4)

(110)

-

(487)

(597)

Depreciation

(3,811)

(2,122)

(5,933)

-

(294)

(6,227)

Amortisation

-

(59)

(59)

-

(691)

(750)

Profit/(loss) before tax

1,695

(3,446)

(1,751)

-

(2,630)

(4,381)

 

 

 

 

 

 

 

Group Amortisation of Goodwill

 

 

(691)

 

 

 

Head office costs

 

 

(1,138)

 

 

 

Group finance costs

 

 

(487)

 

 

 

Group Depreciation costs

 

 

(294)

 

 

 

Other

 

 

(20)

 

 

 

Group Loss before tax

 

 

(4,381)

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

Non-current asset additions

 

 

 

 

 

 

Tangible asset additions

668

203

871

-

(60)

811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reportable segment assets

55,480

21,618

77,098

 

 

 

Elimination of intercompany balances

 

 

(31,633)

 

 

 

Elimination of investments in subsidiaries

 

 

(1,503)

 

 

 

Non-segment goodwill

 

 

12,345

 

 

 

Non-segment fixed assets

 

 

727

 

 

 

Other

 

 

(266)

 

 

 

Total group assets

 

 

56,768

 

 

 

 

 

 

 

 

 

 

Reportable segment liabilities

(30,606)

(15,830)

(46,436)

 

 

 

Elimination of intercompany balances

 

 

36,290

 

 

 

Deferred consideration

 

 

(1,053)

 

 

 

Non segmental borrowings

 

 

(9,103)

 

 

 

Non segmental deferred tax

 

 

(1,095)

 

 

 

Other

 

 

314

 

 

 

Total Group liabilities

 

 

(21,083)

 

 

 

 

 

Crestchic loadbanks and transformers

£'000

Tasman oil tools

£'000

Total

£'000

Other trading entities

£'000

Other

including

consolidation

adjustments

£'000

2016

Total

£'000

Revenue from external customers

19,317

4,469

23,786

-

-

23,786

Finance expense

(131)

(15)

(146)

-

(445)

(591)

Depreciation

(3,766)

(2,161)

(5,927)

-

(274)

(6,201)

Amortisation

-

(57)

(57)

-

(692)

(749)

Profit/(loss) before tax before exceptional items

1,552

(3,648)

(2,096)

2

(2,052)

(4,146)

Exceptional items

(236)

(833)

(1,069)

(83)

(206)

(1,358)

Profit/(loss) before tax

1,316

(4,481)

(3,165)

(81)

(2,258)

(5,504)

 

 

 

 

 

 

 

Group Amortisation of Goodwill

 

 

(692)

 

 

 

Head office costs

 

 

(1,024)

 

 

 

Group finance costs

 

 

(445)

 

 

 

Group Depreciation costs

 

 

(274)

 

 

 

Other

 

 

96

 

 

 

Group Loss before tax

 

 

(5,504)

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

Non-current asset additions

 

 

 

 

 

 

Tangible asset additions

863

126

989

-

-

989

 

 

 

 

 

 

 

Reportable segment assets

68,521

19,839

88,360

 

 

 

Assets of other trading entities

 

 

4,206

 

 

 

Elimination of intercompany balances

 

 

(32,711)

 

 

 

Elimination of investments in subsidiaries

 

 

(8,890)

 

 

 

Non-segment goodwill

 

 

10,985

 

 

 

Non-segment fixed assets

 

 

1,070

 

 

 

Other

 

 

7

 

 

 

Non-segment cash balances

 

 

2,917

 

 

 

Total group assets

 

 

65,944

 

 

 

 

 

 

 

 

 

 

Reportable segment liabilities

(31,551)

(13,350)

(44,901)

 

 

 

Elimination of intercompany balances

 

 

39,128

 

 

 

Liabilities of other trading entities

 

 

(3,997)

 

 

 

Deferred consideration

 

 

(1,123)

 

 

 

Non segmental borrowings

 

 

(11,318)

 

 

 

Non segmental current and deferred tax

 

 

(1,686)

 

 

 

Other

 

 

(262)

 

 

 

Total Group liabilities

 

 

(24,159)

 

 

 

 

 

 

 

External revenue by location of sale origination

 

Non-current assets

by location

 

2017

£'000

2016

£'000

 

2017

£'000

2016

£'000

UK

12,816

10,330

 

11,041

11,819

Australia

1,802

1,203

 

4,053

5,022

United Arab Emirates

4,046

4,963

 

7,678

11,679

Singapore

2,334

3,944

 

4,306

5,272

New Zealand

1,369

702

 

8,987

10,139

Belgium

1,236

1,408

 

3,073

4,094

France

892

355

 

4

7

USA

767

370

 

-

-

China

389

511

 

1,658

1,685

Malaysia

18

-

 

1,314

-

 

25,669

23,786

 

42,114

49,717

 

 

 

External revenue

by type

 

External revenue

by type

 

2016

£'000

2016

£'000

 

2016

%

2016

%

Hire of equipment

15,811

15,827

 

61.6

66.5

Sale of product

9,858

7,959

 

38.4

33.5

 

25,669

23,786

 

100.0

100.0

 

 

 

3.          EXCEPTIONAL COSTS

 

Exceptional costs incurred during the year were as follows:

 

2017

2016

 

£'000

£'000

Acquisition costs(1)

-

103

Reorganisation costs(2)

-

654

Redundancy costs(3)

-

497

Banking costs(4)

-

104

Exceptional costs

-

1,358

 

(1) The exceptional cost in 2016 relates to value added tax on acquisition costs that have been reclaimed by Her Majesty's Revenue and Customs. The costs on which the VAT was reclaimed were reported as exceptional in the years that they arose.

(2) During the prior year, the Group continued to reorganise the Group. The Singapore branch of its Loadcell operations were closed and a property in Australia had been vacated which created an onerous lease. The costs associated with the closure of these operations were disclosed as exceptional.

(3) During the prior year the Group suffered redundancy costs relating to ongoing subsidiaries that were deemed to be exceptional.

(4) Costs associated with resetting bank covenants in the prior year were deemed to be exceptional.

 

 

4.            INCOME TAX EXPENSE

 

2017

2016

 

£'000

£'000

Current tax expense

780

518

Prior year under provision of tax

15

48

 

795

566

Deferred tax (credit)/charge resulting from the origination and reversal of temporary differences

(550)

228

Tax on loss on ordinary activities

245

794

 

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. The differences are explained below:

 

2017

2016

 

£'000

£'000

Loss on ordinary activities before tax

(4,381)

(5,504)

Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19.25% (2016: 20.00%)

(843)

(1,101)

Effects of:

 

 

- income not subject to tax

(325)

(215)

- expenses not allowable for tax purposes

733

505

- difference in tax rates

352

(84)

- losses not recognised as a deferred tax asset

313

1,641

- prior year under provision of tax and deferred tax

15

48

Total tax charge for the year

245

794

 

The standard rate of corporation tax in the UK is 19% since 1 April 2017. The rate will decrease to 17% from 1 April 2020.

 

5.         EARNINGS PER SHARE

 

 

2017

2016

 

£'000

£'000

Numerator

 

 

Loss used in basic and diluted EPS

(4,626)

(6,298)

 

 

2017

2016

 

Number

Number

Denominator

 

 

Weighted average number of shares used in basic EPS

25,899,602

24,004,258

Effects of share options

-

-

Weighted average number of shares used in diluted EPS

25,899,602

24,004,258

 

At the end of the year, the Company had in issue 1,594,451 (2016: 1,391,601) 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.            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.

 

7.            ANNUAL GENERAL MEETING

 

The Company's Annual General Meeting is to be held at the offices of Buchanan Communications, 107 Cheapside, London, EC2V 6DN on 31 May 2018, commencing at 12.00 noon.

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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