Northbridge sees no upturn from oil clients in second half

Northbridge Industrial Services admitted trading conditions in its client markets had “worsened slightly” during the second quarter but that the recent collapse of sterling would enable a sizeable reduction in its debts.

The AIM-listed industrial services and rental company said it "now seems prudent not to assume any upturn in the group's performance for the second half of 2016".

Northbridge explained that despite the rally of crude oil prices since their low in February, trading conditions in the second quarter worsened slightly for the majority of companies in the oil and gas industry, which resulted in a continued decline in investment in current projects and therefore reduction in tool hire needs.

Clients of its load testing business in the Middle East and Asia Pacific regions also experienced challenging conditions which affected both rentals and sales in particular due to lower activity in core markets such as shipyards.

On the upside were businesses focused on power reliability, including load bank rentals in the UK and Europe, the service division and transformer rentals.

The new rental operation in the US has "traded very well" since launching in the last quarter of 2015, so management are planning modest investment later this year to build on this.

On the balance sheet, as more than 90% of net assets are held in currencies other than sterling, the post-Brexit slide in the pound is expected to have a "positive and material impact".

Looking forward into 2017 and 2018, the company said the oil service majors who form part of its customer base and which are said to rely more on the activity levels in the oil fields rather than the oil price, "believe the worst is over and are predicting a return to more positive levels of business in the future", though Northbridge remains focused on reducing costs to help maximise cash generation in the meantime.