Oil & gas woes mean Northbridge likely to see H1 loss, shareholders told

ENGINEERING group, Northbridge Industrial Services, has warned shareholders it sees no reprieve in the oil & gas sector for the remainder of this year.

The directors have said they expect the group to be lossmaking during the first half of 2015 but a programme of cutbacks is likely to ensure it remains profitable and cash generative.

The Stoke-on-Trent-based group is already cutting back on operations in the Gulf, while it is also trimming its business in the UK and Vietnam. The measures are designed to reduce headcount by around 10%.

In an AGM statement today, chairman Peter Harris said: “At the time of our preliminary announcement in April we highlighted a cyclical reduction in our oil & gas related rental revenue. This has continued and, despite a high current level of quotations and enquiries, we now see no reliable signs of any upturn for the rest of 2015.”

The group has acted to insulate itself from the challenging market conditions by closing and selling off its generator rental activities in the Middle East. It is doing the same for its air compressor rental business in the UK, while it is withdrawing completely from Vietnam.

It is selling its non-core hire fleet and making a substantial cut in hire fleet capital expenditure.

The closure and sale of the non-core activities are expected to raise around £1.5m in cash by the end of June and further surplus equipment has been earmarked for sale.

Capital expenditure is expected to be reduced by a further £10m over the next 18 months.

The actions are designed to protect its two core business; the Crestchic portable power or loadbank operations in Singapore and Dubai, and Tasman Oil Tools in Australia.

These are predominantly rental activities with correspondingly high operational gearing. It said its loadbank business in Singapore and Dubai focused on larger projects being carried out in shipyards and in other oil & gas facilities, where there has been a marked slowdown since the beginning of the year, with projects subject to delays, postponements and cancellations.

Tasman in Australia has also suffered from significant cuts in investment by the oil & gas industry, exacerbated by merger and acquisition activity within the group’s customer base.  

The group’s other businesses, Crestchic Loadbanks in the UK and Europe, and Northbridge’s transformer rental operation, have so far been unaffected by the turmoil in the energy sector, and are performing to plan with robust cash flow.

“Whilst we do not believe the current downturn in the oil & gas industry will be prolonged, we nevertheless think it prudent not to assume a return to stability and growth before 2016/17,” said Harris.

“We have therefore taken steps to ensure we will be in a position to take advantage when the upturn arrives. These steps will accelerate the de-gearing of our balance sheet by a combination of reductions in capital expenditure, cost savings and the disposal of non-core and surplus assets.”

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