TIDMNBI
RNS Number : 9893Q
Northbridge Industrial Services PLC
25 June 2020
25 June 2020
Northbridge Industrial Services Plc
("Northbridge" or the "Group")
AGM Statement
Northbridge Industrial Services Plc, the industrial services and
rental company, today issues the following trading update for the
period 1 January 2020 to 31 May 2020, following its Annual General
Meeting which was held yesterday evening at 5PM at the Group's head
office in Burton on Trent.
As previously noted in the full year results announcement on 7
April 2020, in 2019 the Group returned to an operating profit for
the first time in four years, following the severe downturn in the
oil and gas industry. Additionally, cash generated from operations
improved very substantially. This good trading performance
continued into the first quarter of 2020, with Crestchic, which
manufactures, sells and rents specialist electrical equipment into
global markets, entering the year with record sales orders and
Tasman, our gas, geothermal and oil tool rental business, trading
well ahead of the same period in 2019.
COVID-19 update
The Covid-19 pandemic began to impact trading towards the end of
the first quarter as the worldwide lockdowns started, and the
second quarter will include the period in which the lockdowns were
most evident. Overall revenue for the first two months of the
second quarter to the end of May was 13% lower year on year.
Transactional rental activities, which have short lead times, for
both Crestchic and Tasman were most affected, as some customer
sites were closed, and work was delayed. Encouragingly, most
ongoing contracts carried on as expected and, while some new starts
have been postponed, very few have been cancelled. In addition, all
our rental depots remained open for business albeit sometimes under
strict health and safety regulations.
With a record level of orders through the factory for the sale
of loadbanks, the Group was pleased to have been able to keep the
factory open and maintain production throughout this period.
Although pandemic related health and safety protocols have
inevitably impacted productivity to some extent and some deliveries
have been delayed, these are expected to catch up later in the
year. No orders have been cancelled and enquiries remain strong,
with some market sectors, for example data centres, less affected
by the pandemic.
Mitigation measures and additional liquidity
Mitigation measures, introduced to help us during this downturn,
include taking advantage of government support measures when
applicable, a voluntary pay reduction by salaried staff up to and
including the Board, a significant reduction of variable and other
costs and a temporary halt on non-essential capex.
In addition, two important further measures have been taken to
ensure strong liquidity through to July 2022. Firstly, subject to
the extension of the existing convertible loan notes below, we have
received credit approval from our bankers, NatWest, to extend our
current facilities for a further year to 30 June 2022. Net bank
debt had reduced to only GBP2.4 million on 31 March 2020. The terms
of the extension include a capital repayment holiday on the
amortising loans which will increase liquidity over the next nine
months by GBP1.0 million and some additional trade financing
facilities of GBP0.5 million to fund the high factory output. The
interest rates and covenants will be unchanged.
Secondly, we have agreed Heads of Terms on a similar extension
with the holders of the GBP4.0 million convertible loan notes to
extend until July 2022. Given the current environment and owing to
the uncertainty regarding the medium-term economic impact of
COVID-19, the conversion price has been reduced from 125p to 90p
which is an 10% premium to the latest closing share price of 82p.
Conversion can take place at any time up to July 2022 and all other
significant terms and conditions remain the same. Therefore, as
previously announced, the interest rate on the loan notes post July
2021 will increase from 8% to 10% per annum.
GBP3,250,000 of the convertible loan notes are owned by funds
managed by existing shareholder, Gresham House Asset Management
("GHAM"). Funds managed by GHAM currently hold 3,661,796 shares in
Northbridge, representing 13.06% of the total voting rights.
GHAM is a substantial shareholder of the Company and a related
party under the AIM Rules. The extension of the convertible loan
notes held by GHAM constitutes a related party transaction under
the AIM Rules. The directors of the Company, having consulted with
the Company's nominated adviser, Shore Capital, consider that the
extension of the convertible loan notes held by GHAM, on the basis
set out under the heads of terms, is fair and reasonable insofar as
the Company's shareholders are concerned.
The documenting and signing of both the bank facility and
convertible loan note extension will be completed over the coming
weeks. We would like to thank NatWest and the convertible loan note
holders for their continued support.
Current trading
We already have evidence that the easing of lockdown regulations
on a worldwide basis has begun to benefit transactional rental
business, particularly in Crestchic, and we expect this to
strengthen further from the third quarter. Tasman also expects some
previously delayed contracts to start within this timescale. The
underlying sentiment in most of our markets for power reliability,
renewables and natural gas extraction remains positive and we
expect that to continue beyond the impact of Covid-19.
We anticipate that the overall performance of the Group in the
first half will be similar to that of the first half of last year,
but it is still too early at this stage to give reliable guidance
for the year as a whole.
Northbridge's business model is focused strongly towards rental
of equipment and therefore the Group has high operational gearing,
together with a strong cash flow and a conservative depreciation
policy. As the rebound from the virus begins to take effect, this
operational gearing will again benefit earnings and cashflow.
At the end of April 2020 we have seen an increase in the 12
month trailing EBITDA (excluding IFRS16) to GBP7.4 million (April
2019: GBP5.7 million). The equivalent figure at 31 December 2019
was GBP7.0 million.
Northbridge's balance sheet remains strong and the Group has a
substantial portfolio of rental assets which are readily available
for deployment. We have taken robust action to ensure sufficient
liquidity to see the Group through the challenges and uncertainties
resulting from the pandemic.
New Board Director and strategy
We are also pleased to announce a strengthening of the Board
with the proposed appointment of Stephen Yapp as an independent
non-executive director, effective early July 2020 and conditional
upon completion of regulatory clearance. Stephen brings a wide
range of skills and experience to the Board as it addresses
challenges and opportunities arising from the impact of the
pandemic upon our markets.
Beyond COVID-19, we will continue to invest in our core
businesses and will seek to maintain and improve our reputation for
quality, innovation, reliability and customer support for our
manufactured products which are sold throughout the world. On all
our activities, emphasis will be on those markets where we can
achieve the best returns on capital employed. Crestchic rental will
primarily focus on those economies where power reliability is
valued and rental rates are higher, and our secondary focus will be
on opportunities in the energy, marine and resources sectors in
emerging market economies. Tasman will continue to directly focus
on Natural Gas, LNG, carbon capture and storage and geothermal
energy in the regions of the Far East and Australasia where we
already have market leading positions in our product range and QHSE
accreditations.
-Ends-
For further information
Northbridge Industrial Services Plc
01283 531645
Eric Hook, Chief Executive Officer
Iwan Phillips, Finance Director
Shore Capital (Nominated Adviser and Broker) 020 7 408 4050
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, 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, renewables, the oil
and gas sector, data centres, shipping, banking, mining,
construction and the public sector. The product range includes
loadbanks, transformers, and drilling 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 also 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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