14th Apr 2015 08:06
LONDON (Alliance News) - Northbridge Industrial Services PLC saw its shares fall early Tuesday after it warned that its results in the first half of 2015 would be down on the year due to the sharp fall in the oil price.
The industrial equipment rental and services company reported growth in revenue and underlying profit in 2014, but cautioned that current volumes and margins in its oil tool rental business are down overall when compared with this time last year.
"Capital investment in the oil and gas industry as a whole has seen a noticeable reduction in almost all areas of operation and recent merger and acquisition activity amongst the majors will lead to further consolidation in a sector which includes many of our key customers. Underlying demand for our goods and service will take some time to stabilise and, as current contracts unwind, replacement contracts are likely to be harder to secure," it said.
It said some of the current volume and margin reduction in oil tool rentals was expected.
"Larger projects carried out by our Crestchic loadbank business in the Middle East and Far East, which are connected to the oil and gas sector have historically been subject to delays and postponements and this has not changed, although it is still too early to forecast the impact," it said.
Northbridge added that the parts of the business involved in the power reliability and power projects sectors should fare better than the oil tooling business.
The weak outlook came as the company reported a pretax profit of GBP6.3 million in 2014, down from GBP6.6 million in 2013, as it booked GBP655,000 of exceptional items mainly related to acquisitions compared with a GBP637,000 exceptional gain in 2013 that was mainly due to a goodwill reversal.
Excluding the exceptional items, pretax profit rose to GBP7.0 million, from GBP6.0 million, as revenue rose to GBP44.9 million, from GBP37.6 million. Its closely-watched earnings before interest, tax, depreciation and amortisation, excluding the exceptional items, rose by a quarter to GBP13.8 million, from GBP11.0 million.
Revenue was buoyed by new contract wins and contracts that overran from 2013. It was also buoyed by its acquisition of Tasman Oil Tools Ltd and Tasman Oil Tools Leasing Ltd at the end of September.
Northbridge said it will pay a final dividend of 4.0 pence a share, bringing the total for 2014 to 6.2p, up from 5.9p in 2013.
It invested a further GBP7.0 million in its hire fleet in 2014, but kept its gearing level at 31.6%, compared with 31.5% at the end of 2013.
"Our strategy over the next few months will be to concentrate on capital management, further streamlining the group's core activities, and continuing the process of de-gearing in the normal course of business," it said.
The Brent oil price currently stands at about USD58 a barrel, down from over USD115 a barrel last June.
"Although the collapse in the price of oil did not have a material impact on the group's results during the latter part of 2014, the picture so far in 2015 is much harder to analyse," it said.
Its shares were down 10.8% at 426.00 pence Tuesday morning, making it one of the worst-performing stock in the AIM All-Share index.
By Steve McGrath; [email protected]; @stevemcgrath1
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