Buy well-oiled power play Northbridge

Northbridge, which was founded in 2003 and got a quotation on the alternative investment market (Aim) three years later, sells and hires equipment that tests back-up power supplies. The technical term for this vital piece of kit is a loadbank. Northbridge also supplies transformers, generators, compressors and oil tools.

Its customers are from the oil and gas industry, shipping, construction and utility sectors. Northbridge has a global presence based around five regional hubs of the UK, Belgium, UAE, Singapore and Australia. Last year, around 60 per cent of revenue came from hire activities with equipment sales making up the rest.

But there is more to Northbridge than a structural growth story. The corporate plan has more than a hint of private equity about it, perhaps because founder and chief executive Eric Hook used to head up a private equity-backed outfit. Northbridge makes no bones about its aim to grow partly by acquisition. So it mops up companies that fit its geographic and industry segments. In doing so, it widens its product offering and international reach. It's a plan that has paid off. Earnings and dividends have grown in every year since its Aim flotation. Pre-exceptional profit before tax has doubled in the past five years, while the dividend has grown at a compound 9 per cent per annum.

One crucial deal was completed last year - the acquisition of Singapore-based Crestchic Asia Pacific in September. Northbridge already had the other part of the jigsaw, having acquired the UK Crestchic business at the time of its flotation. So the deal tied up some loose ends and, more importantly, increased Northbridge's present in the buoyant Asia Pacific shipbuilding and energy markets.

Asia Pacific revenues jumped 29 per cent to £14.3m last year on the back of the first contribution from the Asian part of Crestchic and high utilisation rates. Middle East revenues grew even more, surging 71 per cent to £7m. Europe has been softer, with revenues up only 4 per cent last year to £16.3m. But, hopefully, a European economic recovery will get going at some point and, in the meantime, Northbridge can redeploy equipment to more buoyant Far East and Middle East markets. North America is a gap, with Northbridge having no rental fleet there, although its bosses have told us they are "looking at this".

The latest trading update suggests the Northbridge machine remains slick. The company says first-half trading in both sales and rental was good; the high level of sales orders gives good visibility for the second-half revenue. Cash flow was said to be strong, with debt ratios set to drop by the year-end.