Despite strong revenue growth, contract delays and a change in its business mix hit first-half profitability at industrial rentals and services company Northbridge Industrial Services (NBI). This contract slippage and "a more conservative view" on the global economy prompted Westhouse to pare back its full-year pre-tax forecast from £5.8m to £5m, although the broker still maintains that Northbridge is "undervalued relative to its peers".
Chief executive Eric Hook said that the benefits of the delayed contracts in Australia and the Middle East will begin to flow through during the second half and will extend into 2013. However, the effects of this slippage and costs linked to management's relocation to Singapore will hit full-year profits to the tune of £600,000 - hence the earnings downgrade.
First-half margins suffered due to a change in the business mix in favour of equipment sales, over the more lucrative hire business. Operating profits were down by nearly a quarter to £1.65m, but cash-flow pre-working capital movements was maintained at £3.4m. Northbridge expects cash receipts to grow "as the business mix swings back to rental" and "capital spending returns to normal". Expenditure on new fleet and plant amounted to £6.4m during the six-month period - a nine-fold increase on the first half of 2011.
Westhouse expects full-year EPS of 24.3p (from 25.7p in 2011).
| NORTHBRIDGE INDUSTRIAL SERVICES (NBI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 231p | MARKET VALUE: | £36m | |
| TOUCH: | 227-235p | 12-MONTH HIGH: | 286p | Low: 209p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 173p | NET DEBT: | 52% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 11.4 | 2.01 | 10.8 | 1.75 |
| 2012 | 14.2 | 1.41 | 6.7 | 1.85 |
| % change | +25 | -30 | -38 | +6 |
Ex-div: 3 Oct Payment: 5 Nov *Includes intangible assets of £10.7m, or 69p a share | ||||
