Northbridge reports ongoing recovery across its markets
By Josh White
Date: Tuesday 09 Feb 2021
(Sharecast News) - Industrial services and rental company Northbridge updated the market on 2020 on Tuesday, reporting that trading in the second half showed a "marked improvement" following the sharp Covid-19-related downturn in the second quarter as lockdowns were introduced in all of its markets.
The AIM-traded firm said that, although the pandemic was still influencing the business, the impact continued to reduce as the year progressed.
It said it was expecting profit before tax and exceptional costs to be modestly ahead of management's expectations, and slightly ahead of 2019, underpinned by the ongoing recovery in all markets.
Total group revenue for the full year would be "broadly similar" to 2019, the board said, assisted by the continued strong growth for the manufacture and sale of Crestchic's loadbanks.
That helped mitigate the impact the lockdowns had on rental revenue for both Crestchic and Tasman during the middle two quarters of the year.
Rental revenue at Tasman was recovering year-on-year, due to the strong first quarter, despite the problems crewing rigs during the pandemic and quarantine rules in Northbridge's sector of the market.
The change in the overall revenue mix towards the lower-margin direct sales had reduced overall gross margins for the year, the board said.
As it announced in its strategic update on 8 December, the continued growth in factory output during 2020 was driven by demand from a wide range of markets and geographies, all of which were looking to ensure power reliability in critical industries.
In addition, renewables were becoming a more important part of the generating mix, further fragmenting sources of power.
Northbridge said worldwide data management and cloud computing was still a growing component of the demand for power, and the proportion of factory output going directly to end users in the data centre sector reached 22% during the year.
Cash flow and EBITDA was described as "strong", with net debt including convertible loan notes reducing further during the year to £5.4m from £6.4million.
That followed the continued investment into the hire fleet to meet customer needs, and additional working capital investment in increased stock for factory production and to avoid Covid-19 component delivery delays.
Net bank debt stood at £1.5m at year-end, narrowing from £2.6m a year earlier, with net gearing remaining "low", below 20%.
"For the third year in a row, our factory order book for the outright sale of loadbanks started 2021 at a record level, 22% ahead of last year's record high," the board said in its statement.
"Rental activity, particularly in Europe, is slower to start, due to the much tighter lockdowns following the winter jump in Covid-19 infections.
"However, we expect to recover quickly as the vaccine programme is rolled out further."
Northbridge said demand was expected to strengthen in the second quarter across all of its geographies, and grow again in the second half, supported by increasing demand and by a backlog of quotes and enquiries.
"In Tasman, following a positive overall performance during 2020, demand is not expected to increase until the second half of the year as rigs and crews are repositioned following the pandemic interruptions.
"The serious shortage of natural gas and LNG, in both Australia and New Zealand, where we are mainly focused, continues to drive demand."
Northbridge said it would release its results for the year ended 31 December on 13 April.
At 1321 GMT, shares in Northbridge Industrial Services were up 8.72% at 106p.
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