Northbridge Industrial Services takes drastic action to stay profitable

Dogged by the oil industry slump, Northbridge Industrial Services has severely slimmed the business down and warned of interim losses, but said it hoped to remain in the black for the full year after cutting staff numbers and selling off businesses and rental fleets in the UK, Middle East and Asia.

Management said there had been a "marked slowdown" since the beginning of the year at shipyards and in other oil and gas facilities, with projects subject to delays, postponements and cancellations and so hitting its loadbank business in Singapore and Dubai.

Therefore expectations had been "very significantly" reduced for the full year, although due to a quick and fairly drastic response the group is expected will remain profitable and cash generative in 2015.

Analyst Alastair Stewart at broker Westhouse Securities said he was likely to slash full year adjusted pre-tax profits to just £0.25m from his previous expectations of £7.5m.

The AIM-listed industrial services and rental company warned that it sees "no reliable signs of an upturn" in oil and gas related rental revenue for the rest of 2015, though it continued to enjoy a high current level of customer quotations and enquiries.

A statement from management said: "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.

"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."

This has seen the closure and sale of the generator rental activities in the Middle East, the closure and sale of the air compressor rental business in the UK, the closure of the Vietnam business, the sale of various non-core hire fleet, a substantial cut in hire fleet capital expenditure and an overall headcount reduction of 10%.

The closure and sale of non-core activities is expected to raise £1.5m cash by the end of June, with £10m of capex cuts planned over the next 18 months.

As a result, Northbridge will be focused on its Crestchic loadbank and transformer business and Tasman Oil Tools. "Both these activities have extensive, modern and well maintained hire fleets, which are virtually unencumbered and, even at reduced levels of rental activity, will generate good cashflow."

Westhouse's Stewart said: "There was no discussion of dividend in the statement but we would suggest the safest view is that there will not be one this year and possibly next."