Losses mount for industrial services group on oil & gas volatility
The exceptional volatility of the global oil & gas sector has been highlighted in a disappointing set of full year results for Stoke-on-Trent based industrial services and rentals group, Northbridge.
The group, which is heavily exposed to the sector, saw a 30.2% drop in group revenue to £23.8m (2015: £34.1m). The performance had been widely predicted by the group ahead of today.
The business made a loss before tax of £5.5m, (2015: £8.6m) including exceptional costs of £1.4m (2015: £7.2m).
Included in the figures was subsidiary Tasman Oil’s 57.6% revenue drop to £4.5m (2015: £10.5m), while fellow subsidiary Crestchic saw a 15% fall in its own figures to £19.3m.
However, it wasn’t all bad.
Crestchic’s European rental business was more buoyant with revenues up 16.8%, which helped improve the revenue mix towards the more profitable hire activity. Hire revenue was 66.5% (2015: 55.6%) of the total revenue.
The overall gross margin was 38.4% (2015: 43.4%). The decline in margin was due to lower utilisation in oil tools where the business continues to charge a full depreciation on its entire hire fleet.
Not surprisingly, CEO Eric Hook was more focussed on the positive.
He said: “During the second half of the year the group’s performance stabilised and Northbridge continues to generate a positive operating cash flow.
Trading in early 2017 has continued at levels experienced in late 2016. We are still confident of an upturn in the oil and gas sector however it’s timing remains uncertain. We are focused on return on capital, and Northbridge is well positioned to capitalise on a recovery with a solid and cash generative core business, a strong balance sheet, and having maintained critical mass and customer relationships throughout the trough of the cycle.”
In outlook, he added: “There can be no doubt as to the severity of the downturn affecting the oil and gas industry over the last two years and, like others, this has had an impact on our trading.
“It has also conditioned us to look more sceptically at the pace of the future recovery and ‘lower for longer’ remains the oil and gas industry’s mantra. However, we do believe that there is a better trading environment on the way, supported by a more stable oil price as a result of more co-ordination by producer nations and a reducing surplus.”
