Northbridge Industrial Services Plc (LON:NBI), the industrial services and rental company, has issued the following trading and strategic update, ahead of its Annual General Meeting which will be held today at 1.00 p.m. at the Group’s head office in Burton on Trent.
Trading update
As previously noted in the full year results announcement on 13 April 2021, Crestchic, the Group’s Power Reliability business, began the year with a record order book for manufactured equipment. Ongoing order levels have remained in line with expectations and encouragingly it is expected that the factory will remain at full capacity through the year.
Crestchic hire revenue for the first half of 2021 will be significantly ahead of the COVID-affected first half of 2020 with revenue in the Far East particularly strong in the first quarter before revenue in the US, Europe and the Middle East also picked up strongly in the second quarter.
Activity has been encouraging across all sectors, with data centres remaining a key and growing area and marine rebounding well after a subdued 2020. Opportunities are continuing to emerge in the related areas of renewables and grid resilience.
Although the Group plans to pass on most of the cost increases seen from the rise in commodity and shipping prices, the supply chain disruption experienced in 2020 is continuing to slightly affect margins as a consequence of extended assembly times.
Visibility for the second half is growing with trading set to continue in this positive vein well into the third quarter.
Trading at Tasman, the Group’s Drilling Tools business, has remained resilient during the first half. COVID-related difficulties in moving people and equipment around the world and out to rigs remain a barrier to a recovery in activity but the trading environment is expected to improve in the second half of the year, particularly in gas-related activity in Australia.
Overall, the Group’s half year revenue and pre-exceptional pre-tax profit will be significantly ahead of 2020 and the Group remains firmly on course to meet full year management expectations.
New banking facilities and settlement of the convertible loan notes
It is a pleasure to today announce a £10 million full refinancing with HSBC. The Board is delighted to begin what is expected to be a long and successful relationship and would like to thank the HSBC team for a professional and swift re-financing process.
The new facilities are more cost-effective, larger and simpler than our current facilities. This, together with the global reach and capabilities of HSBC, will enable us to deliver on our strategic objectives, which include the construction of the additional factory building in Burton.
These new facilities have also already enabled us to offer to redeem the Group’s £4 million convertible loan notes, the interest rate on which was set to rise to 10% on 1 July 2021. The Company is pleased to confirm that all bondholders have responded to our offer and that they requested that £3,056,938 of the loan notes to be repaid in cash and £943,062 to be converted into Ordinary Shares in the Company.
As per the original terms of the loan notes, the redemption is subject to a 25% early redemption premium and a total redemption payment of £3,821,172.50 will be made today. The early redemption penalty included of £764,234.50 will be disclosed as an exceptional interest cost in the half year report.
The conversion of £943,062 of the loan notes at the exercise price of 90 pence per share will see 1,047,848 new ordinary shares issued. An application to AIM to issue these new shares has been made and admission is expected to occur on 18 June 2021 (“Admission”).
The Board is pleased with the outcome of the process of settling the loan notes. The level of conversion shows confidence in the Company’s strategic direction whilst the redemption allows us to minimise dilution and maintain a prudent level of gearing. The refinancing, together with the conversion and the redemption of the loan notes, will result in a substantial reduction in our ongoing interest costs. The Board would also like to place on record its thanks to NatWest for all of their help over the past six years.
Strategic update
Today, the retirement of Ash Mehta marks the conclusion of the reshaping of the Board as the Group sets out on its journey of transformation and the new team is already working smoothly together. Combining the roles of Chairman and Chief Executive, together with the promotion of Chris Caldwell to the Board, has not only reduced costs but also clarified and speeded up decision making. To support the executive team, Stephen Yapp has taken on the responsibilities of Senior Independent Director. Judith Aldersey-Williams retains her responsibilities for Governance and Risk and has taken over from Ash as Chair of the Audit Committee. The Board is comforted that Ash has agreed to be retained for the rest of the year in an advisory capacity to assist in a smooth transfer of responsibilities and thanks him for the exceptional contribution that he has made to the Board during his fourteen years of service.
We are also pleased to announce, following consultation with major shareholders and the receipt of a fairness opinion from our broker and NOMAD, Shore Capital, the successful implementation of a long term incentive plan which we believe will support the retention of key executives and officers and their alignment to the creation of significant shareholder value over the three year life of the plan.
Planning permission has now been received for the construction of a third building at the site of our head office, factory and hire facility in Burton upon Trent. Construction contracts are out at tender and we intend to break ground in the third quarter of 2021 with an anticipated completion date in the first half of 2022. The new facility will add a much needed 50% to our production capacity and can be further expanded as and when required for future growth.
The process to explore the possibility of the divestment of our Tasman drilling tools division is proceeding on timetable and we are currently assessing the non-binding indicative offers received to date. We remain hopeful that a divestment at a fair value will be achieved this year but, should this not be possible, are developing contingency plans to improve the profitability of the business should we consider it to be in the interests of shareholders to continue to own the business for the time being.
Northbridge is firmly on track to meet management expectations for the half and full year in 2021 and to build on the strong position of the Crestchic Power Reliability business. Growth will continue to come both from established and emerging business sectors, notably data centres and renewables/resilience and through opportunities for further market penetration, particularly in continental Europe and the USA.
Total voting rights
Following Admission, the Company’s issued share capital will comprise 29,281,259 Ordinary Shares, including 215,150 Ordinary Shares held in treasury.
Therefore, the figure of 29,066,109 Ordinary Shares should be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.
