Northbridge Industrial Services plc (LON:NBI), the industrial services and rental company, has announced the following pre-close trading update in advance of its results announcement for the year ended 31 December 2020, which is scheduled to be released on 13 April 2021.
Trading in the second half of 2020 showed a marked improvement following the sharp COVID-19 related downturn in the second quarter as lockdowns were introduced in all our markets. Although the pandemic continues to influence the business, we were pleased to see that the impact on the Group continued to reduce as the year progressed. We expect profit before tax and exceptional costs to be modestly ahead of management’s expectation, and slightly ahead of 2019, underpinned by the ongoing recovery in all our markets.
Total Group revenue for the full year will be broadly similar to 2019, assisted by the continued strong growth for the manufacture and sale of Crestchic’s loadbanks. This 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 continued to recover year on year, due to the strong first quarter, despite the problems crewing rigs during the pandemic and quarantine rules in our sector of the market.
The change in overall revenue mix towards the lower margin direct sales has reduced overall gross margins for the year.
As announced in the Group’s strategic update on 8 December 2020, the continued growth in factory output during 2020 was driven by demand from a wide range of markets and geographies, all of which are looking to ensure power reliability in critical industries. In addition, renewables are becoming a more important part of the generating mix, further fragmenting the sources of power. Worldwide data management and cloud computing continues to be a growing component of the demand for power, and the proportion of factory output going directly to end users in the datacentre sector reached 22% during the year.
Cash flow and EBITDA continues to be strong, and net debt (including the convertible loan notes) reduced further during the year to £5.4 million at the year end (2019: £6.4 million). This was following the continued investment into the hire fleet to meet our customers’ needs and additional working capital investment relating to increased stock for factory production and to avoid Covid-19 component delivery delays. Net bank debt was £1.5 million (2019: £2.6 million) and net gearing remains low, below 20%.
Outlook for 2021
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. 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. Demand is expected to strengthen in Q2, across all our 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.